By Hannah Lang and Lisa Pauline Mattackal
(Reuters) – Cryptocurrency investors who are seeking high returns are beginning to embrace a new type of digital asset.
As the crypto market is experiencing a surge, investors have started to look away from the original cryptocurrency – bitcoin – and instead focus on its descendants, which are native tokens of blockchain platforms that host smart contracts and applications.
The MarketVector’s Smart Contract Leaders Index, which tracks major tokens of this kind – including ether, dot and solana – has grown 36% in 2023, beating bitcoin’s 33% increase. Solana’s token has even gone up 76% this year.
Bundeep Rangar, CEO of a crypto-focused asset manager called Fineqia, commented that he expects the biggest crypto returns to come from smart contract tokens on decentralized finance (DeFi) platforms.
“Those are ones that you will find capital appreciation, similar to what a growth stock will be,” he added.
CoinShares’ data reveals that investors have started to allocate their funds to token products tracking ether and solana, even as bitcoin products experienced four consecutive weeks of outflows.
Out of the top 20 largest crypto assets, seven of them are smart contract tokens, including ether and dot, solana and cardano.
Analysts from Bank of America (NYSE:BAC) have compared smart contract tokens and the blockchain-based applications they power to growth stocks in the equities world, typically technology shares. They stated that they expect 2023 to be the year of token price divergence.
James Butterfill, head of research at CoinShares, remarked that bitcoin still dominates the crypto market, as its share of the total crypto market capitalization has increased slightly to 40%, from 38% at the start of the year.
However, he also noted that the increasing strength in smart contract tokens could be an indication of the performance of the most established DeFi protocols, in spite of the market disturbances that occurred in 2022.
Butterfill cautioned that the global macro outlook and central bank policy could have a negative impact on the growth of crypto projects and their associated tokens.
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He concluded that the crypto market is maturing and that price divergence is likely as the market evolves.
