Discussions
about the pricing of L1 Blockchain tokens that are designed to compete with Ethereum
is a rather interesting subject. The development of such platforms in 2021 contribution greatly to the crypto market
rally last year. One of the perspective tokens was Solana (SOL) that was
closely associated with Sam Bankman-Fried, who was behind the infamous recently
defaulted FTX, and his companies. SOL prices rose by a mad 21,000% from January
through to November 2021. Such a generous yield attracted many to similar
tokens. Now, as the market knows about his scheming, the valuation of such
projects should not be compared to the SOL story.
Many
infrastructure projects have lost a large sum of their market cap.: Solana lost
95%, Avalanche – 90%, Harmony – 96%, Near – 91%. Some perspective blockchain
projects like Aptos are trying to stay afloat but it is unlikely that they will
survive for a long time. Some of these projects, like Celestia Labs that has received
capital from only a few venture investors, have not yet been through Initial Coin
Offering (ICO) The valuation of these investments in current circumstances are
likely to be discounted amid the revaluation of the project itself. So,
investors are likely to lose money.
Stablecoins
continue to crash and burn.. Binance had to perform mandatory conversion of
some stablecoins into its own native BUSD token this September and this hit other
projects that issue stablecoins badly. This conversion pushed USDC capitalisation
down by 20% to $42 billion. USDC managers are now calling on investors to
convert USDT into USDC without any commissions to secure investors in “times of
uncertainty”. Circle, a regulated fintech company that is behind USDC, has
recently reported revenues of $274 million. That is two times less the amount
the company should receive if it invested its capital in short-term Treasuries
as it declared it would do.
So there
are many reasons for anxiety in the market now as liquidity has contracted
dramatically and many crypto projects went bankrupt or had to scrap their
ambitious plans. But there is an upside to this as these bankrupt projects are not going
to weigh on prices as they have made all possible efforts to sell their assets
before going bankrupt. So, only new bankruptcies will be a threat for the
crypto market now.
The bad
news is that over one million retail crypto enthusiasts who were clients of FTX
may leave the market forever after a complete loss of their money or even if
their money is blocked for an uncertain period of time. The exodus of such a
significant portion of retail investors after many institutional investors have
left the market amid expensive borrowings, weaken risk appetite and great
reputational damage could cause a very long correction.
Targets for
BTC prices remain at $14,800 per coin after a possible recovery up to $20,000
per coin.