A Story of Success: Altcoins in 2020-2021

Current crypto indicators (distribution of large wallets, institutional activity, and even characteristic patterns of technical analysis) point to a gradual transformation of Bitcoin's solo rally into short but sometimes explosive mega-rallies of some altcoins. Bitcoin's price has soared about 660% since the start of that crypto summer cycle in December 2020 to peak at around $52,000 per unit on May 8, 2021, while other cryptocurrencies have delivered gains of 5000% or more, over much shorter intervals. “Is it worth another try?” With a meticulous and comprehensive approach to analytics – the answer is definitely yes!

Cryptorenaissance of Summer 2023 brought about some new names to the altcoin universe. Analysts often outline good fundamentals and price dynamics of Injective (INJ) – a smart contracts-enabled token that utilizes a Tendermint PoS consensus mechanism enabling community members to directly govern, validate, burn auctions, and more. Other examples of good performance and credibility are Optimism (one of the most popular Layer 2 scaling solutions, which is much cheaper than Ethereum to use) and MINA (the world's lightest blockchain, powered by participants using zero-knowledge protocol).

Such coins as Solana, Avalanche, Cardano, Monero, and the like are already considered sorts of heavyweights. But at some point in history, they were nothing more than risky altcoins. Let’s revisit that period in an attempt to make interesting projections regarding today’s altcoin stars.

2020: “Decentralization Reigns over the Planet”

Undoubtedly, 2020 was the year of decentralized finance. According to DeFi Pulse, the amount locked in DeFi grew to nearly $15 billion on December 30, 2020, up from $658 million earlier that year.

Interestingly, a new phrase, “crypto farming” emerged during that period. In exchange for placing their BTC (Bitcoin) or Ether (Ether) as collateral with cryptocurrency lender DeFi, a user was enabled to receive a “service token” (something akin to a large block of common stock) that allowed the holder to “discuss, govern and vote on all changes to a particular crypto platform's protocol.”

Even passive ownership of these subordinated tokens has become a very lucrative solution in 2020. For example, Compound's COMP, which debuted in June that year, rose in value from $61 in just three days from June 18 to $382 on June 21 after its launch on the U.S. exchange Coinbase Pro. It closed 2020 at $148 – even with the half correction taken into account later on, that was an apparent victory of the altcoin world!

According to Glassnode, the market was enthusiastic about the rise of high-value (>$10,000) BTC wallets in July of that year, and when the mutual correlation between highly capitalized crypto-tokens and altcoins started to decline significantly, crypto investors decided to act. In several episodes, altcoins such as ZEON and SONM (SNM) showed good momentum, propelled by significant trading volumes. However, up until now, the market did not appear to be broad and deep enough that it made sense to engage in purely speculative short-term self-fulfilling price rallies. However, over time, the returns on passive purchases (HODL) gradually improved, and technical risks – on the contrary, decreased, so the growth, even in the absence of any particular news, was usually well-supported by inflows of new funds.

Without a doubt, one of the best cryptocurrencies to invest in 2020 was LINK. Chainlink's particular value was based on the fact that this token was very good at providing so-called “decentralized oracles” – coins that serve important functions at the crossroads between blockchains and the real-world financial ecosystem – including centralized exchanges, wallets, and DeFi protocols. The project even managed to earn a mention and endorsement from the World Economic Forum, WEF, in Davos! Importantly, this infrastructure has also been integrated deep outside of the Ethereum ecosystem, while providing some much-needed basic compatibility with the main ecosystem of the DeFi universe. After ending New Year's Eve at $11.27, its prices tripled again in the first few weeks of 2021, reaching $52.68 by May 8, 2021.

Among mid-capitalization tokens, Lido (LDO) demonstrated the greatest price increase. The cryptocurrency added 350% on the back of the recovery of the stETH/ETH peg. The OP L2 Optimism protocol token (was up over 200%) and, remarkably, the Ethereum Classic (nearly 150% to $117 by May 8, 2021) also showed positive dynamics. The latter's growth was fueled by Ethereum developers' announcements about the upcoming transition to PoS for the Goerli testnet. The crypto community has been living in anticipation of miners migrating in favor of Ethereum's more efficient protocol, the notorious Proof-of-Stake (PoS).

One should understand what has been making DeFi so attractive as a profit booster with a good set of listed coins embedded in one or two complementary algorithms and very acceptable levels of risk: with DeFi, all digital assets involved were locked/fixed for subsequent funding of new projects via smart contracts. If a borrower failed to repay a crypto loan, which was often used as an IDO collateral, it was simply locked by an exchange to pass it back to the owner.

2021: Year of Hope and the Maturity of the Monetization of the Industry

Avalanche (AVAX)

Avalanche is often described as a “Blockchain 3.0” token. It represents a heterogeneous network of multiple blockchains. The main idea of the project is to implement a new consensus protocol that allows system-wide transactions in seconds while guaranteeing the same level of security as the traditional blockchain ecosystem.

Avalanche provides a kind of umbrella to protect DeFi projects from hackers. Developers have had access to a set of tools to launch and deploy a decentralized network like Ethereum while accelerating all financial transactions.

The Avalanche platform consists of three main components: two blockchains (C-Chain and P-Chain) and a so-called directed acyclic graph (DAG), the X-chain. The NAG structure differs from the traditional blockchain structure, in which transactions are recorded in chronological order. Instead, the NAG links transactions to each other, and users do not have to wait for transactions to be aggregated into blocks.

The Avalanche platform has seen significant growth in 2021, including a 470% increase in the average number of daily transactions. Its native cryptocurrency token AVAX has been even more successful, more than doubling in value from its launch in September 2020 through the end of the first decade of May 2021 at $37. However, in order for AVAX to continue fueling similarly strong price momentum, the coin must increase trading volumes and show a steady growth in market capitalization.

Decentraland (MANA)

Facebook's rebranding of Meta sparked a meta-universe token boom in 2021. Decentraland represented the virtual world itself, in which people have been empowered to perform some tasks and activities that were previously largely considered off-line only – like attending concerts or visiting an art gallery – but lacked the ability to do so. The price of MANA soared from $0.11 to $1.49 per coin between January and mid-May 2021.

Decentraland has arrived with a highly unusual but compelling scheme for its own monetization. Basic virtual services were generally offered for free, but each new customer was gradually and graciously lured to expand some functionality, which required linking their crypto wallet to spend money in one of these online worlds.

Cardano (ADA)

Cardano is a well-known publicly available blockchain platform. It is open source and decentralized, and consensus is reached using PoS (Proof-of-Stake). It can facilitate Peer-to-Peer transactions using its internal cryptocurrency ADA.

Cardano's development began in 2015 under the leadership of Ethereum co-founder Charles Hoskinson. The project was backed by the Cardano Foundation, based in Zug, Switzerland. At the time of its launch in 2017, it was the largest cryptocurrency using a Proof-of-Stake blockchain, which was seen as a greener alternative to PoW (proof-of-work) protocols, and has now become a new norm.

Cardano's price rally began with a burst of excitement about new blockchain protocols. Between January and mid-May 2021, the price of ADA went from $0.16 to $1.62 per coin.

Livepeer (LPT)

Livepeer is a great example of the digitalization of basic workflows. It's a decentralized video transcoding network, meaning it saves the go-between from reformatting video to make it available on different devices.

Transcoding is usually an expensive process, but Livepeer didn't require a lot of expensive hardware. Instead, it uses unused processing power on people's computers and rewards them with LPT tokens. Companies can stream video for a small fee, and network members are rewarded. As with ADA, Livepeer's LPT token price began a meteoric rise in January 2021, soaring 2871% from $1.41 at the beginning of the year to $40.48 per coin as of May 8, 2021.

Solana (SOL)

The first block of Solana was mined on March 16, 2020. In June 2021, Solana sold $314 million worth of shares in her company in the form of digital tokens, which caused a stir and a large wave of enthusiasts and industry developers, none of whom, however, were ever able to replicate her success. In November 2017, Anatoly Yakovenko published a white paper describing Proof-of-History – an innovative approach for ensuring historical data between computers is accurate, which was particularly important when they don't trust each other. Reliable globally aligned clocks made network synchronization very simple, and now many P2P venues use parts of that brilliant technology to ensure the smoothness of non-brokered transactions. When synchronization is simple, the resulting network can run lightning-fast, limited only by network bandwidth. This was the basic idea behind the Solana protocol, which remains its pride and success till now.

The SOL token price showed excellent performance in 2021 on the back of rising trading volume. From January to May 2021, the SOL price rose 1990% from $2.16 to $43 per coin.

Monero (XMR)

Monero still enjoys the third-largest developer community among cryptocurrencies after Bitcoin and Ethereum. Its privacy features have attracted so-called “crypto-punks” and users who need enhanced privacy measures not found in other cryptocurrencies.

Monero's roots go back to CryptoNote, a cryptocurrency protocol first described in a white paper published by Nicholas van Saberhagen in October 2013. The author described privacy and anonymity as “the most important aspects of electronic money” and called Bitcoin's traceability a “critical flaw.”

Interestingly, the first XRM rally occurred back in 2018, and the current one was essentially the third rally for the coin. The coin took off from $162 as of early January to $475.55 per coin as of May 10, 2021, an increase of nearly 300%.

1Inch

1Inch is a proprietary token of 1Inch Exchange, a decentralized exchange aggregator that combines multiple DEXes into one platform to allow its users to find the most efficient and cost-effective exchange channels across all platforms. 1Inch allows its holders to participate in the management of the platform by voting on changes.

1Inch was launched in August 2020 after raising $2.8 million in funding from Binance Labs, Galaxy Digital, Greenfield One, Libertus Capital, Dragonfly Capital, FTX, IOSG, LAUNCHub Ventures and Divergence Ventures.

In December 2020, 1Inch raised another $12 million in Series A funding led by Pantera Capital with others including ParaFi Capital, Blockchain Capital, Nima Capital, and Spartan Group. The funding round was conducted through the sale of SAFT (a simple agreement for future tokens).

1Inch token price rose 450% between January 22, 2021, and May 10, 2021, on the back of corporate success stories and cold wallet announcements.

Persistence (XPRT)

Persistence is an interoperable protocol designed to facilitate the creation of next-generation financial products. The Persistence technology stack has been providing the infrastructure to seamlessly connect DeFi with traditional finance across multiple platforms, and enabling the creation of innovative crypto solutions to augment the DeFi and NFT sectors.

The project was launched in January 2020. The persistence team was a multicultural team consisting of experienced developers with solid technical backgrounds. Among other notable things, the protocol developed Comdex, a decentralized commodity trading and financing platform that connected commodity traders and provided deal financing options for sellers.

After its exchange debut in March 2021, XPRT rallied 3400% in the two months through the end of May 2021, before hitting a second top with a 2800% gain to the offering price after a brief correction.

DeFi Trading Bots

We see there are a lot of similarities between the crypto-renaissance #2 and current events. Many crypto traders aren’t sure how they would follow hundreds of promising altcoins in order to obtain timely exposure to their rapid price appreciations. One of the apparent solutions – is subscriptions to the DEX bot or DeFi trading bot.

The ability to operate 24/7 without the need for constant monitoring means that traders can take advantage of trading opportunities, even when they are not actively monitoring the market. Furthermore, DeFi trading bots can help reduce emotional decision-making, as they rely on data and algorithms rather than impulsive human actions.

Moreover, DeFi trading bots often come with risk management features, such as stop-loss orders and risk assessment tools. These features can help traders minimize losses and protect their investments in volatile markets. Finally, using a DeFi trading bot can offer traders access to a wider range of trading opportunities and markets, as they can simultaneously monitor multiple platforms and execute trades across different tokens and exchanges.

Afterwords

Having said all the above, many crypto assets now look materially undervalued when viewed over the longer term. When more decisive action is required, hedging strategies are always good (e.g. long positions on “hot altcoins”, short positions on L1 altcoins, etc.).

Unlike in 2020, when so-called IDOs (Initial DEX Offerings, exchange debuts of tokens created on decentralized platforms) were in trend, in 2021 the biggest growth is shown by coins related to monetized online games. Web3 projects look promising, which, apparently, will further develop and attract everyone’s attention. What would be today’s greatest reasons for an impending joyride? Let’s keep an eye out and figure it out!