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.

Cryptos feed Join Telegram

Recommended content

Recommended Content

Editors’ Picks

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Cryptocurrency exchanges are on board Terra’s LUNA hard fork and Do Kwon’s plan for the Terraform Labs token’s rebirth. Do Kwon has garnered support from leading cryptocurrency exchanges for the new Terra chain. 

More Terra News

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Ethereum dipped below the $1,900 support level over the past few hours. A decisive close below such a vital demand zone will put ETH at risk of a 38% correction toward $1,200. 

More Ethereum News

A big price move is coming for Binance Coin; here’s what to look out for

A big price move is coming for Binance Coin; here’s what to look out for

A brief technical and on-chain analysis on Binance Coin price. Here, FXStreet's analysts evaluate where BNB could be heading next. 

More Binance Coin News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Bitcoin price, Ethereum and other cryptocurrencies are stabilising after the cryptocurrency space got slaughtered last week and two weeks ago.

More Bitcoin News

Bitcoin: The last rebound before capitulation

Bitcoin: The last rebound before capitulation

Bitcoin is showing bullish signs in the lower time frames, which can be taken advantage of by traders in the next couple of days. But looking at BTC from the higher time frames suggests that the bottom is not in yet.

Read full analysis