Investors questioning the functionality of Bitcoin are turning to smart contract tokens.
Users are moving away from cryptocurrency, which is designed as an alternative to cash, preferring native crypto assets of blockchain platforms that host smart contracts and applications. According to data from MarketVector, the Smart Contract Leaders Index (MVSCLE), which tracks major tokens such as ETH, DOT and SOL, increased by 36 percent in 2023, surpassing even the 33 percent rise of Bitcoin. Solana’s native crypto-asset SOL is up 76 percent this year.
DeFi Protocols Show a Robust Appearance
Bundeep Rangar, CEO of crypto-focused asset manager Fineqia, stated that he expects the biggest crypto returns to come from smart contract tokens on platforms that support decentralized finance (DeFi) applications.
CoinShares data shows that investment products following Ethereum and Solana have seen small inflows, while Bitcoin products have been out for four consecutive weeks.
About seven of the top 20 crypto assets consist of smart contract tokens, including ETH, DOT, SOL, and ADA. BofA analysts also likened smart contract tokens and the blockchain-based applications they power to growth stocks in the equity world, typically technology stocks. Bank of America analysts, in their research report dated February 24, said: “We expect 2023 to be the year when token prices diverge.”
Bitcoin has long been trading alongside technology stocks, but the growing growth of smart contract tokens could be wearing down Bitcoin.
The cryptocurrency’s 30-day correlation with the Nasdaq turned negative on February 23 for the first time since early December.
Some crypto watchers say it indicates that the most established DeFi protocols are performing solidly despite the market turmoil in 2022. But they warn that the global macro outlook and central bank policy could hit the growth of crypto projects and their associated tokens.
James Butterfill, Director of Research at CoinShares, also warned that it is too early to say that there is a big divergence in crypto.
58625
