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‘Ethereum Killers’ Solana, Terra and Avalanche Got Killed in January

In brief

  • “Ethereum killers” are blockchain networks that use smart contracts to enable DeFi, NFTs and other applications.
  • They’ve been some of the biggest losers in the January crypto crash.

January has been brutal for Bitcoin, with prices declining 20% since the start of the month. But as bad as it’s been for BTC, things have gone much worse for other cryptocurrencies in the top 15 by market capitalization, specifically the “Ethereum killers.”

In January, Solana has lost 42% of its value relative to U.S. dollars, Terra is down 40%, and Avalanche has been buried by a 36% drop. Lower down on the table, Algorand is worth 43% less since the start of the year. Closer to the top, Cardano ticked down 20%, while Polkadot has managed to look pretty good, having only lost 27%—roughly the same percentage drop as Ethereum itself. 

So-called Ethereum killers are blockchains that aim to be like Ethereum—decentralized networks that host applications and use smart contracts to automate functions—but are generally faster and less expensive to use. 

With Ethereum-based innovations such as decentralized finance (DeFi), NFTs, and blockchain-based games becoming in vogue over the last 18 months, there’s increasing competition for users. Since newer networks can’t match Ethereum’s traction with users, they compete with their technology. Most use proof-of-stake models, the upshot being that transactions are finalized quicker and much cheaper than they would typically be on Ethereum, which has struggled with network congestion.

And in 2021, the model looked really good.

Solana, for instance, ended 2020 with $26 million in daily trading volume and a price tag of $1.84, according to data from CoinMarketCap. But it closed out 2021 with $1 billion in volume and a price of $178.52. During that same time frame, the amount of SOL tied up in the network’s DeFi protocols—including exchanges, derivatives markets, and staking services—shot up from nothing to nearly 65 million coins (worth over $11 billion), by DeFi Llama’s count.

Avalanche got momentum in the second half of 2021, with the price increasing tenfold from $11.13 on July 1 to $114.16 on December 31. Terra charted a similar path, traversing from $5.73 to $91.36 in Q3 through Q4.

A good portion of those gains have been erased. Solana is back below $100, Terra is hovering at half that with $51, and Avalanche sits between them both at $70.

Despite most of crypto’s attention remaining on the price movement of Bitcoin—thanks to its dominance within the market—it managed to keep its losses to just under 20% after a decent finish to the week. Though that’s still the worst January since 2018, toward the start of what’s now called “Crypto Winter.”

However, markets are showing some signs of recovering from the crash. In addition to optimistic price data for the top coins, investor demand is also slightly up—for Bitcoin, at least. According to asset management firm CoinShares, there have been cumulative inflows into digital asset investments (such as the Grayscale Bitcoin Trust and ProShares Bitcoin Futures ETF) for each of the last two weeks.

That doesn’t yet extend to Ethereum, Solana, or other assets tracked by CoinShares. Nearly $27 million flowed out of ETH investment products last week, with an additional $5.3 million and $2.3 million leaving Polkadot and Solana, respectively.

The killer January continues.

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