2022-05-19
- Leading analysts predicted an altcoin bear market where BNB, XRP, Solana, Cardano and Dogecoin will witness 90% decline in prices.
- In a recent report, analysts critiqued Solana’s infrastructure, identifying intermittent transaction processing issues and spam that slows down SOL.
- Total value locked in the DeFi ecosystem of Solana, Cardano and Binance Smart Chain has plummeted over the last week.
Data for a recent report by Bybit revealed high transaction activity on Ethereum-killer Solana. However, analysts argue this could indicate an upcoming decline in altcoin prices. XRP, Cardano, Solana and Dogecoin could soon witness a 90% collapse.
Analysts predict colossal crash in altcoin for this reason
After a drop in US tech stocks and the S&P 500, the cryptocurrency market witnessed a correction. Bitcoin and Ethereum’s correlation with stocks and indices has remained high over the past two months, lowering cryptocurrency prices.
Bitcoin price plummeted below the key psychological level of $30,000 and altcoins followed. Among altcoins, Ethereum, BNB, XRP, Solana, Cardano, AVAX, Dogecoin and Polkadot prices went through a steep decline.
Sam Kopelman, UK manager of Bitcoin and cryptocurrency exchange Luno, believes the crypto market is hit by a spillover of the US Federal Reserve’s monetary policy tightening and plummeting stock prices.
Kopelman told Forbes,
The market clearly remains in a state of fear, caused by the de-pegging of [Terra’s collapsed stablecoin] UST, as well as fear spillover from the broader financial markets.
A recent report by cryptocurrency trading platform Bybit revealed that there is a massive decline in the total value locked on Ethereum, Solana, Cardano, and Avalanche in the DeFi ecosystem. There has been a 43% decline in the total value locked in DeFi, as $84.67 billion has been shaved off since the beginning of May 2022.
Total DeFi ecosystem TVL Source: Defi Llama
The fear and volatility in the crypto ecosystem have resulted in a consistent outflow of capital that was previously invested in altcoins like Solana, XRP, Cardano, Dogecoin, Ethereum and Avalanche.
Proponents note that altcoins have declined faster than Bitcoin in terms of total value locked, number of active users, activity and trade volume.
Though Ethereum-killer alternatives like Solana have presented themselves as highly efficient cryptocurrency products or services, the lackluster price performance can be attributed to outdated accrual designs and misaligned incentives.
For protocols on the Solana network, a standard token model is deployed where token emissions are distributed to incentivize liquidity. The revenue generated by token holders through staking is subpar. The lack of innovation and incentives in token models on Solana and Ethereum alternatives has been identified as a critical trigger for loss in protocol revenue.
Alex Kuptsikevich, a FxPro senior market analyst, told Forbes,
[The] panic sell-off in the markets and the persistence of investor anxiety heralds the approach of a panic peak.
Analysts believe Bitcoin price could plummet to $20,000, and altcoins could draw down 90% in the ongoing bear market.