The rising demand for altcoins and DeFi

One of the effects that DeFi had had on the cryptocurrency market is to increase investor interest in altcoins, or as some are calling them, “next-gen tokens”.  As the sector matures, and as crypto buyers understand more about the market, there is not so much a movement away from Bitcoin, as a growing belief in the altcoins.

Altcoins have finally emerged as an important element of the market at large. According to Cointelegraph, “ quick look at data available on Google Trends shows us that searches related to the term “Ethereum killer” have been soaring over the past 90 days,” indicating a growing interest in altcoins, especially those that support DeFi functions and smart contracts.

Examples of the more sought after altcoins are Cardano (ADA), Solana (SOL), Polkadot (DOT) and Terra (Luna). Solana had a particularly good run recently, with it managing to withstand a substantial market sell-off. In more recent days, Solana experience a 17-hour outage, which the network attributed to a denial-of-service attack carried out by bots. Its price went bearish since posting an all-time high of $213 on 9th September, but SOL had pulled back by 39% to sit at $128.87 on 22nd September. Cardano has also been able to record substantial profits, posting numbers of +70% and +1,200% over the last 90 and 180 days, respectively. Obviously nearly all cryptos have taken a knock this week, but the YTD numbers still look great for those who have owned any of these altocins for a while.

Antoni Trenchev, managing partner and co-founder of lending platform Nexo, believes there is a growing institutional demand for coins such as SOL and LUNA. The evidence to back this up is there: both coins have been able to make their way into the list of top 15 cryptocurrencies by total market capitalization.  Trenchev told Cointelegraph:

“This is a reflection of companies going deeper into crypto. Over the first two months of 2021, major institutions like BlackRock, Square and MicroStrategy were only just dipping their toes into Bitcoin. Now they’ve tasted its benefits and are looking to harness the untapped potential of up-and-coming blockchains and DeFi coins that could yield higher returns.”

He also suggested that while the crypto market may currently be in the midst of an alt-season, there is something different this time round, and that is the fact that there is more stability in the price of Bitcoin and Ethereum. As Cointelegraph points out, institutional traders flocked to SOL as demand for BTC and ETH appeared to plateau. As a result, at the beginning of September, “SOL-centric investment products represented a whopping 86.6% of the total weekly inflows into the crypto investment market.”

Furthermore, SOL’s combined investment products witnessed inflows in excess of $49.4 million between 6-10 Setember, and SOL enjoyed a 275% week-over-week increase in its value. And for the fourth consecutive week, demand for different altcoins has quite easily exceeded that of BTC products.

Kadan Stadelmann, chief technical officer of end-to-end blockchain infrastructure solutions provider Komodo, commented that rising demand for undiscovered projects is nothing new for the crypto market. However, what separates the present from previous cycles is the sheer amount of capital flowing in from institutions. 

Stadelmann had another interesting point to make: “Hundreds of DeFi projects are flying under the radar. Many of these projects have solid technology and can gain upward price momentum once institutions recognize their potential.” That’s good news for fintechs using DeFi!