"The stock market is not a one-way street" is an important maxim on the capital markets. It doesn't just apply to equities, though: bonds, commodities and currencies also go through lively ups and downs from time to time. The still young crypto market cannot escape such cycles either. Digital coins are undergoing a marked period of consolidation at the moment, for instance, although given the breathtaking rally last year this is not exactly surprising. Bitcoin, the largest crypto asset in the world, alone appreciated by around 60 per cent in 2021. Other digital currencies such as Ethereum even managed to multiply in value. According to data from "CoinMarketCap", the total market capitalisation of all crypto assets rose from around USDbn 880 at the start of the year to more than USDtn 2.2 by New Year's Eve 2021. This demonstrates that the crypto market has long since reached a size that makes it impossible to ignore.
What is more, the fundamental breeding ground for crypto assets continues to be well fertilised. Digitisation is positively sweeping the globe, upending ever more industries in the process. With their innovative characteristics, cryptos are playing an important role in this regard. Digital certificates of authenticity and ownership, for instance, have become a trend over the last year. Known in the jargon as non-fungible tokens, or NFTs, they are already finding their way into the art world, the music industry and even gaming. The beneficiary of this development is Ethereum, since the NFTs have to date predominantly been generated on the Ethereum blockchain. Other coins too, though, are profiting from this trend. They include Solana, which only came into being in 2020. The network is regarded as ultrafast and is much less expensive compared with Ethereum. It's little wonder, then, that Solana has since climbed into the top 10 cryptos. From a stock market view, however, the gap to its competitors remains large: with a market capitalisation of USDbn 27, so far the blockchain project tips the scales at only around one tenth of the value of Ethereum.
Smart contracts, which can no longer be manipulated in the blockchain, are another key feature in the decentralized finance (DeFi) sector. The reason for this is that, whereas every transaction in the classic financial system needs a bank as an independent third party, here the program code is sufficient to guarantee proper processing, saving both time and money. Smart contracts are used for digital loans, for instance. Almost anyone can incur debts or lend money on the blockchain without the need for a financial institution. The pioneer in this field may be Ethereum but, while it is losing ever more of this technological edge, other cryptos such as the fore-mentioned Solana and also Avalanche are gaining ground. The latter is a platform for dapps (decentralised applications) and smart contracts which has set itself the goal of solving the scalability problem of other projects with a total of three blockchains. That allows transactions to be executed quickly and at low cost even at peak times.
Another interesting project in the smart contracts sector is Cardano, from Ethereum co-founder Charles Hoskinson. In contrast to Bitcoin, for example, the concept, developed in 2015, is based on a proof-of-stake consensus protocol by the name of Ouroboros which not only consumes less energy but also promises maximum security and stability. That brings Cardano into consideration for a large number of commercial applications, such as forgery-proof picture credits, swapping money for shares and even monitoring a production process – think Internet of Things (IoT). What is more, in Daedalus Cardano has also brought onto the market a proprietary digital wallet that enables users to hold and send the cryptocurrency ADA, the name given to the internal payment means of the project. Although the value of Cardano has recently undergone a significant correction, the blockchain is still up almost 200% on a year-on-year comparison. With a market capitalisation of USDbn 33.8, Cardano has since actually risen to 6th place in the worldwide crypto ranking.
Source: coinmarketcap.com
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