- While it’s been pretty much a sea of red for nearly everything in cryptocurrency markets, altcoins such as Ether, Solana and Avalanche, the smart contract trio, have taken a beating.
- Bitcoin meanwhile, the venerable cryptocurrency has still managed to hold its head above the rest, falling to as low as US$28,000 at one stage before recovering.
In a scene reminiscent of the stock market, the riskiest segments of the cryptocurrency markets are getting hammered a lot harder than “blue chip” tokens like Bitcoin.
While it’s been pretty much a sea of red for nearly everything in cryptocurrency markets, altcoins such as Ether, Solana and Avalanche, the smart contract trio, have taken a beating.
Traders were caught off guard by the sharp correction in Ether, especially since the cryptocurrency that has been the de facto standard for smart contracts, is set to move to a game-changing and environmentally friendlier proof-of-stake later this year.
Dubbed “The Merge” Ethereum will throw off its current energy intensive proof-of-work method to secure its blockchain with the far more energy efficient proof-of-stake, where existing holders of Ether “stake” some of their cryptocurrency to validate transactions.
Some observers have pointed to the collapse of TerraUSD, LUNA and Anchor Protocol as only now rippling through the rest of the cryptocurrency markets, but signs of a lack of demand for Ether have been building for some time.
Part of the draw for protocols such as Ethereum, Avalanche and Solana is that they are integral to decentralized finance or DeFi and are used to generate yield from a variety of smart contracts built for lending, investing, speculation and borrowing.
But the collapse of TerraUSD has scared investors off of DeFi for now and also raised the stakes for Ethereum’s merge later this year – if it doesn’t go according to plan or even if there is a sign of any delays, Ether could drop even further.
Technical chart watchers have noted that Ether remains well below a key trading level – US$2,000, which it needs to trade above meaningfully, and soon, before bearish sentiment takes grip.
Bitcoin meanwhile, the venerable cryptocurrency has still managed to hold its head above the rest, falling to as low as US$28,000 at one stage before recovering.
Comments by the former crypto-sceptic CEO of JPMorgan Chase, Jamie Dimon, that Bitcoin has even further to go higher, has helped to act as a bit of a buffer for Bitcoin’s decline.
Bitcoin is increasingly being seen as a “safer” asset in an otherwise volatile market and a growing number of investors are rotating out of so-called altcoins, into Bitcoin while the market finds its footing.
