The crypto market is witnessing a classic sector rotation in the wake of programmable blockchain Solana’s outage.
For the first time in several weeks, decentralized finance (DeFi) giants like UNI, AAVE, chainlink are leading bitcoin and the broader market higher with double-digit percentage gains on a 24-hour basis. Meanwhile, native tokens of the so-called Ethereum alternatives like Solana, Avalanche, Cosmos, Algorand are nursing 5-7% losses, per data source Messari.
“After the phenomenal rally of solana and being discovered by many people as a strong contender to long-term rival for Ethereum due to its cheap gas fee and smart contracts protocols it’s time for a reset and bitcoin has regained focus,” Laurent Ksiss, managing director of exchange-traded products at 21Shares, told CoinDesk in a Telegram chat. “It’s clear that Solana’s technical glitches on Monday caught many by surprise and, as a result, may have tainted its rally and premise.”
“Solana and Arbitrum’s outage was bad optics for Ethereum alternatives in general,” crypto research firm Jarvis Labs said. “What we are seeing now in the market is the rotation of money between ecosystems.”
On Tuesday, Solana’s high-speed blockchain suffered downtime as “resource exhaustion” on the network brought blockchain validation to an hours-long halt. As such, activity across Solana’s multibillion-dollar DeFi and non-fungible tokens ecosystem came to a grinding halt.
Recently launched Arbitrum, which scales Ethereum by leveraging Optimistic rollups technology to increase transaction speed and lower fees, was also knocked offline. These events drew the ire of the crypto industry bigwigs.
“Events of today in crypto just go to show that genuine decentralization and well-designed security [like Ethereum] make a far more valuable proposition than some big transaction throughput [speed] numbers coming from an exclusive and closed set of servers,” Gavin Wood, computer scientist and founder of Founded Polkadot, Kusama, Ethereum, Parity, Web3 Foundation, tweeted Tuesday.” If you can’t run a full-node yourself, then it’s just another bank.”
Solana’s SOL token chalked up more than a four-fold rally to over $200 in the three weeks to Sept. 9 as the NFT boom and high transaction fees on Ethereum drove investors to relatively cheaper and faster alternatives. Native tokens of Cosmos, Avalanche and Cardano also charted impressive rallies during that time frame, while ether remained flatlined near $3,400.
At press time, SOL is trading near $165, while bitcoin and ether are changing hands near $47,000 and $3,400, respectively.
Bitcoin printed a UTC close above the crucial 200-day moving average on Tuesday as the dollar dropped after a softer U.S. core consumer price index for August eased concerns that the Federal Reserve may speed up plans to unwind liquidity-boosting stimulus program.
“Investors are refocusing on the main cryptocurrencies. Support for bitcoin remains strong again and is cyclical and we may see breakthrough above key levels,” 21Shares’ Laurent Ksiss added. “Solana’s performance has been overwhelming last month and this drawback could see further depreciation as the market resets and focuses on what the consequences are to its glitches.”
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
XRP ruling by Judge Torres denied in Coinbase lawsuit, yet another blow to Ripple
XRP programmatic sales ruling by Judge Torres completely rejected by US Court in Coinbase lawsuit. US Court rejected Coinbase’ motion to dismiss SEC lawsuit, weighing heavily on Ripple’s legal battle.
Sushi price eyes $3 after clearing key weekly resistance level
Sushi price flips the $1.628 resistance level into a support floor after a month of struggle. A temporary retracement might be a good opportunity to accumulate SUSHI before a retest of $3. A breakdown of the $1.267 barrier would invalidate the bullish thesis.
Bitcoin Price Outlook: Will $150 billion bank Morgan Stanley send BTC to new ATH?
Bitcoin has recorded increased volatility this week, with most of BTC holders currently in profit. As market activity continues to grow with long-term holders now ramping up on distribution pressure, the pioneer crypto is bearing the brunt of growing overhead pressure.
Coinbase loses first round of battle against SEC
A day after the SEC filed a lawsuit against Binance last year, it went after Coinbase in a sign that the clampdown is extending to key players in the industry. The latest development in the matter is that the court has ruled in favor of the financial regulator, which means the case will continue.
Bitcoin: BTC may have recovered, but is it out of the woods?
Bitcoin’s (BTC) upward momentum has shown a significant decline for the past two weeks or so. This development led to a bearish signal on the weekly and an uncertain outlook on the monthly.