Polkadot, Solana, Terra, Lead Large-cap losses amid market drop

The native tokens of layer 1 blockchains Polkadot, Solana, and Terra were among the biggest losers Friday morning amid a fall in the broader cryptocurrency market, data from multiple sources shows.

Polkadot (DOT) was trading at $27 during Asian hours, down 7% from Thursday’s peak of $30.16. Solana (SOL) fell 6.6% to $178, while terra (LUNA) traded at $69.43, down 8% from Thursday’s $76.72 high.

The Solana price drop was partly driven by fundamental woes as the network saw relatively slow blockchain production during late U.S. hours. The network is capable of processing over 2,000 transactions per second on its high-speed blockchain, which crawled to just 500 transactions per second, CoinDesk reported earlier.

Some expect Solana's decline to continue until a major support level is reached. “SOL/USD is heading towards the $145 daily support level,” said Phil Gunwhy, Chief Marketing Officer at Solana-based lending platform Blockasset. “There is not much substantial support along the way until that mark, only the $155.5 daily level which does not look overly convincing in terms of its potential motive force.”

Meanwhile, fundamentals remain strong for large-cap cryptocurrencies like Polkadot and terra. Polkadot’s much-awaited ‘para chain’ feature went live last month, allowing investors and the community to lock up DOT tokens in an auction for other blockchains, that build atop the main Polkadot blockchain. In return investors, receive the native tokens of the secondary blockchain.

According to data from tracking tool DeFiLlama, Decentralized Finance (DeFi) apps, which offer lending, trading and other financial activities on the blockchain, lock up over $13 billion worth of LUNA and other Terra-based assets like UST, with LUNA fundamentals further strengthened by a token-burning mechanism that went live in November.

Memecoins see smaller declines than layer 1 blockchains

‘Memecoins’ like dogecoin and Shiba Inu saw relatively smaller declines–falling 3.7% and 4.0% compared to yesterday’s highs of $0.18 and $0.000032 respectively. Meanwhile, coins associated with Ethereum competitors Algorand and Cardano fell 4.8% and 6.2% respectively. Avalanche, another layer 1 network, fell 3.4% at press time.

Popular Ethereum mainstays like decentralized exchange Uniswap (UNI) and metaverse game Axie Infinity (AXS) were among the other big losers in the Asian hours, dropping as much 9% from Thursday highs.

The declines were primarily technology-driven and followed those of bitcoin, the world’s largest cryptocurrency by market capitalization, which fell to a low of $47,440 from Thursday’s high of $50,910.

Global risk assets like bitcoin declined on Thursday morning shortly after rating agency Fitch downgraded Evergrande, a Chinese real estate conglomerate with an estimated $300 billion in obligations. Fitch said Evergrande had defaulted and wouldn’t repay its investors, sparking fears of an imminent sell-off in other markets.

Market sentiments were also dented by inflation fears, with the U.S. Federal Reserve’s plans to curb its generous monetary policy, and the spread of the new variant of the coronavirus, Omicron.

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