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Since the Fed seems ready to take a tougher stance on monetary policy (for now…maybe), especially considering Recent high inflation data, It seems that cryptocurrency investors are rethinking how they allocate funds in this area.
People expect this to mean good news not only for the price of Ethereum, the native token of the Ethereum network, but also for its Tier 1 alternatives.Ether and its competitors are not a store of value like gold (the main value proposition of Bitcoin), but betting on complex construction platforms Smart contract, Non-fungible tokens (NFT), Decentralized finance (DeFi) Apps and other magic.
Mike Novogratz, CEO of Galaxy Investment Partners, said: “That’s why you see Ethereum really outperforms Bitcoin.” CNBC’s “Squawk Box” on Wednesday“If you look at the price of Ethereum, Ethereum is still as bullish as possible. People see Ethereum as a technical bet, and Bitcoin is a bet to devalue legal tender.”
Therefore, if the Fed seems to be cooling off endlessly printing money, investors who are optimistic about blockchain technology may seek to buy more assets than Bitcoin.
Of course, the most mature one is Ethereum, but with the prosperity of NFTs, Ethereum transaction costs have become prohibitively high. If the market is looking for other networks that will not bankrupt banks in every transaction, it will not be enough. It’s strange.
Over the past few months, Ether’s performance has been incredible.
Nevertheless, the 90-day correlation coefficient between Bitcoin and Ether is still very high, at 0.84, and it is generally rising. This means that they are increasingly in line, even though Ethereum still outperforms Bitcoin.
When it comes to certain Tier 1 tokens, some investors looking for the king of substitution have found substantial returns on an absolute basis. (The first-tier platforms are those independent blockchains, not the second-tier network, which is built on one of the first-tier blockchains).
Noelle Acheson, Head of Market Insights for the Crypto Market, wrote: “Strengthening development work, large amounts of capital and increasing use are the reason behind the market’s shift from BTC and, to a lesser extent, ETH to tokens on platforms such as Solana and Avalanche, Genesis Trading. Her must-read November Market Review(Acheson is the former editor of CoinDesk’s Crypto Long and Short. Genesis Trading is owned by CoinDesk’s parent company, Digital Currency Group.)
Year-to-date, the native tokens of Avalanche, Cardano and Solana have soared so high…
…The only way to view the returns of other Tier 1 tokens requires a logarithmic chart.
When priced in Bitcoin, these three have already defeated Ether.
At the same time, since the beginning of 2021, the tokens supporting Algorand, Cosmos and Polkadot have been declining when Ether prices these currencies.
However, since the “Black Friday” sell-off on November 26, only Algorand’s ALGO has been profitable.
In the past few weeks, when pricing in ETH, none of the six major Tier 1 altcoins we listed produced positive returns, which means they are underperforming.
[Alt ETH price returns]
According to John Wu, president of Ava Labs, the technology company that created the Avalanche blockchain, the next year may see Tier 1 tokens perform better. He believes that the view of increasing utility will help promote price increases in the coming year.
“I think that in 2022, the correlation between prices and the trend to outperform prices—
Or market value—utility and the adoption rate of certain chains will continue to grow,” Wu said on CoinDesk’s “Forerunner” TV show on Thursday. “Now, if the entire market drops due to shrinking or other reasons, you will see The performance of the first layer is excellent, because the first layer is basically the best way to play the overall utility in the field. “
However, if Katie Stockton, the managing partner and technical analyst of the analysis firm Fairlead Strategies, is correct, then the big players in the first tier may not outperform Ethereum anytime soon.
Stockton created two Relative rotation graph, It measures the performance of one asset relative to another asset based on relative strength and relative momentum.
She explained in an email to CoinDesk: “They show the tracking history of each coin, standardized with respect to the ether, and represented by the crosshairs of the chart.” “The chart keeps moving clockwise, and the outstanding coins come from Up and right, and vice versa. The X axis measures the relative intensity, and the Y axis measures the momentum of that relative intensity.”
(For those who want to learn more about how to calculate this value, This is a beautiful guide.)
In the short term, five of the six alternative Tier 1 tokens have been lagging behind Ethereum. Solana’s SOL is an exception.
In the long run, ALGO, Avalanche’s AVAX, Cosmos’ ATOM and SOL are all weakening and moving towards the “lagging” quadrant, that is, the quadrant where Cardano’s ASA is now located. Polkadot’s DOT is currently the only leading ether, it just barely managed to do this, and seems to be preparing to fall into the “weak” quadrant.
Stockton said: “In the short term, compared with Ethereum, it is less likely to perform well in the near future.”
Will it really be like this? This may depend on large investors, who are currently involved in the field of cryptocurrency. As the complexity of their surpassing Bitcoin continues to increase, they may take the first step into Ethereum, leading to a relative increase in the cryptocurrency, the second-highest market capitalization. However, as their knowledge grows further–especially when it comes to the huge transaction costs of Ethereum–they may then look for alternatives in other Tier 1 tokens.
Then it will be a matter of timing, although timing is never easy to predict.
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