The last five months have been a torrid period for cryptocurrency holders and projects. After racing to print all-time highs in November 2022, most crypto assets, including Bitcoin, have been in a downward trend for the better part of H1 2022.
Various factors fan these unforgiving circles, blowing hot and cold and damaging crypto portfolios. From what’s clear, despite their high volatility and rejection by some governments and institutions, cryptocurrencies are here to stay and have proven a utility in times of crisis. After the expansion to record highs in 2021, most crypto assets are down over 50 percent from peaks. There are fundamental factors behind these contractions, with most of them having a consequential impact on Bitcoin and thus crypto.
Despite the high inflation and the ideally preferred nature of BTC due to its deflationary properties, the coin continues to be under immense selling pressure. Specifically, the shift of monetary policy by leading global banks, including the FED, the ECB, and BoE, has had severe ramifications for the digital gold. Subsequently, given its direct correlation with altcoins, top layer-1 projects have been having a rough time, losing a significant chunk of their market cap.
In this article, we shall preview how the sharp depreciation of Bitcoin affected the valuation of some of the globe’s leading smart contracting platforms.
Price Volatility of Top Smart Contracting Platforms
- Binance Coin (BNB)
BNB, the native coin of Binance and the BNB Chain ecosystem, had its market cap drastically slashed during the crypto crash of the past six months. At peaks, BNB traded at $690 and was the third most valuable cryptocurrency. However, things took a turn for the worse in Q1 2022 following the contraction of Bitcoin prices. In April, BNB prices had dipped by more than 30 percent, changing hands at $419. Even though a brief consolidation alluded to shifting sentiment and possibly a recovering market, BNB further slumped to below $300 before bouncing to $309 when writing in mid-May 2022. At its current valuation, BNB has tanked by more than 60 percent, highlighting the fragility of its ecosystem, which is, by comparison, more active and dApp dense.
- Solana (SOL)
Meanwhile, the crypto winter from November 2021 also blew cold on Solana. The smart contracting platform aims to resolve the major pain points facing Ethereum, mostly around scalability and fees. As such, the network has attracted developers who have been launching DeFi, NFTs, and the metaverse dApps. Still, while Solana has been commanding headlines, its network is actively developing and is at mainnet beta. The dump of BTC prices saw SOL prices contract from all-time highs of $260 to $104—a more than 50 percent slump. However, attacks on the network with inconveniencing delays questioned Solana’s security, further denting SOL’s valuation. SOL cratered to new 2022 lows by early May before springing to $53 at press time. Still, the project has mega positives considering its value proposition and quest to release a scalable, secure, decentralized, and environmentally friendly smart contracting platform.
- Avalanche (AVAX)
Amid the crypto downturns, Avalanche wasn’t spared the re-evaluation. Avalanche is presenting a triple-layer blockchain focused on DeFi. Its C-Chain has proven reliable for deploying dApps. By comparison, launching projects on Avalanche is considerably cheaper and with higher settlement speeds than Ethereum and most other competing, EVM-compatible networks. Avalanche is also technically superior and architected to scale infinitely while remaining compatible with Ethereum. Coupled with the Rush Program to incentivize development in Avalanche, AVAX prices blew up to be one of the most valuable DeFi projects. At its peak, AVAX traded at $146, but in April, its valuation had sunk to $78 before dropping to $36 by mid-May 2022. The correction also reflects the state of DeFi, whose TVL is more than 50 percent from peaks.
- Terra (LUNA)
Perhaps, a highlight of the month—and years to come–is the denting collapse of the Terra ecosystem behind LUNA and UST. Terra’s primary objective was to drive the adoption of crypto solutions using synthetics. Central to Terra’s success was LUNA, a governance and utility token. Do Kwon and Terraform Labs created UST, an algorithmic stablecoin backed by, among other assets, Bitcoin, AVAX, LUNA, and BNB. Each UST was convertible to $1 of LUNA and was attractively interest-bearing. The collapse of UST saw the LUNA Foundation Guard (LFG) sell its reserve of BTC and LUNA as an intervention to restore the USD-UST peg, causing the broader market to tank. At its peak, LUNA traded at $119 before dropping to around $84 in April and collapsing to cents in mid-Q2 2022.
- Polkadot (DOT)
Polkadot is a launching pad for quality projects ideally tested on the Kusama blockchain. Despite being meticulously developed by a team of experienced developers, Polkadot is yet to fully take off. The Polkadot Slot Auction announcement, a core scaling feature for the smart contracting platform building an internet of blockchains, coincided with rabid bears. In H2 2021, DOT prices soared to as high as $55 but dropped to $11 from $18 registered in late Q1 2022 and into April.
Like Polkadot, the Flow blockchain, a smart contracting platform focused on NFTs, P2E, and Metaverse, also experienced serious price fluctuations. It is despite the deep experience of the team. Flow is developed by the team behind the first successful NFT project, CryptoKitties. FLOW peaked at $46 before free-falling by over 90 percent to $5 and shrinking to $3 when writing.
- Atom, Polygon (MATIC), NEAR, and Algorand (ALGO)
Following the DOT and FLOW cue, Atom—a project focused on interoperability and launched the IBC, also fell from peaks of $44 and is currently trading at $11, more than 50 percent from April 2022. ATOM losses are almost the same posted by Polygon—an Ethereum sidechain—and the NEAR Protocol. Algorand, a research-driven proof-of-stake project, is comparatively more resilient, dropping 28 percent in the last trading month. It is down to $0.5 from $0.7, far from its all-time highs of $3.3.
Closing Thoughts
Cryptocurrencies are still nascent and finding applications in various sectors of the economy. While policymakers catch up and more users and entities adopt blockchain and crypto solutions, the sphere’s volatility will reduce as liquidity deepens. This would be positive and even draw more participants to crypto and experiment on smart contracts.
