01 December 2023

November has been kind… Bitcoin is looking healthy battling key resistance at $38,400 after putting in a ~9% gain. Ethereum is gunning for $2,100 again and has reversed its losses with a ~4% gain against Bitcoin in November. Solana has outdone the market with a 54% surge last month after it posted an 80% gain in October. So, what’s the catch?

Aside from concerns over a possible recession, the markets seem to be in a bullish mode. The US dollar index, DXY, is declining while investors in stock indices, crypto, and even gold are rejoicing.

Leading into the Bitcoin halving in April, markets anticipate the first rate cut by the US Fed to fuel the crypto rally further. Yes, there will likely be pullbacks before. But being volatile is in crypto’s nature, right?

For the upcoming bull market, we wanted to analyse the top Proof-of-Stake (PoS) blockchain-based coins – Ethereum, Solana, Cardano, Polygon, and Tron in particular. Which of these coins will emerge on top in terms of returns in 2024 and 2025? Let us find out in our Hot Take today.

Top-3 stories of the week:

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The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.44 trillion - UP 1.4%

• Bitcoin price - $38,151 - UP 2.0%

• The dollar index (DXY) - 103.32 - DOWN 0.4%

• Bitcoin Dominance - 53% - UP 0.8%

• Crypto Fear and Greed Index - 71 - the market is in greed

THE HOT TAKE

PoS coins in the upcoming bull market: the winner is…

We love speculation. However, this exercise is meant to be taken with a bit of caution – individual blockchains have risks associated with them – an exposure to a defunct exchange (Solana for example), lack of real adoption, regulatory action on a founder etc.

The blockchains and the coins we are analysing today (Ethereum, Solana, Cardano, Tron and Polygon) are all in top-15 crypto assets by market capitalisation. They have been fan-favourites in their own right in the past few years. They also differ in their cycle of adoption. Ethereum, for example, is already considered a crypto blue chip. That means, it is less risky but its current market capitalisation (10x of any other coin we are analysing today) suggests that the return may be lower compared to the rest.

Given the above, lets analyse the key trends leading into 2024 for these coins and what they individually lack.

1. Ethereum

Current market cap: $251 billion; Current coin (ETH) price: $2,100

All-time high (ATH): $4,600; Multiple to ATH: 2.2x

What’s working?

• Strong TVL: Ethereum has 51.5% market share in total value locked for staking. The value sits at just shy of $26 billion across its entire ecosystem.

  

  Source: Glassnode

• Scaling solutions are growing: Ethereum network attracts innovative protocols to build on top of their chain. Initially we saw Base, a L2 solution from Coinbase that amassed $139 billion in deposits even before their mainnet launch. Last week, the buzz was around BLAST, an Ethereum L2 scaling solution, that garnered $500 million in TVL in just 5 days.

What’s not working?

•  Near-term outlook for ETH isn’t great. It has failed to breach the $2,100 mark multiple times recently. Its strength against BTC is also currently not good.

• Gas fees is still a concern in spite growing adoption of layer-2 scaling solutions.

Our prediction on returns from today over the next 2 years: 3-5x

2. Cardano

Current market cap: $13.4 billion; Current coin (ADA) price: $0.38

All-time high (ATH): $2.9; Multiple to ATH: 7.7x

What’s working?

• Active Dev community: Cardano remains an active blockchain with a massive developer base. Besides the role of Input Output Global (IOG), tasked with the management of the Cardano network, there are a host of other developers building unique products in the ecosystem. According to Santiment, ADA remains the second busiest network with 536 commits this month, next to Polkadot.

• Historical performance: Since January, ADA has surged by over 50%. Although rivals such as Solana (SOL) have risen by over 400%, ADA’s performance is still commendable. ADA saw a peak price of $1.18 in its first bull run in January 2018 and reached a high of $2.96 in September 2021. This was two months before BTC’s peak. We could see similar patterns in the next bull run and ADA can rally well, if it crosses the $0.40 psychological barrier.

What’s not working?

• While Cardano has a thriving dev community, it lacks DeFi protocols and are not preferred for stablecoin settlements due to their transactions per second (TPS) and cost.

• On the other hand, each smart contract on Cardano can only interact once per block, which is why decentralised exchanges in the blockchain have workarounds like off-chain order matching or queues.

Our prediction on returns from today over the next 2 years: 5-10x

3. Tron

Current market cap: $9.1 billion; Current coin (TRX) price: $0.1

All-time high (ATH): $0.22; Multiple to ATH: 2x

What’s working?

Tron’s appeal lies in low transaction fees, fast speeds, support for multiple stablecoins, a thriving DeFi ecosystem, and strong community backing.

• Strong revenue: Tron’s low fees and quick transactions (despite concerns around centralization) have led more and more merchants to accept payments in stablecoins via Tron’s network. Besides Ethereum, Tron remains the most bankable network with an average of $30 million monthly revenue, according to DefiLlama.

• Stable coin dominance: More than half of the total supply of USDT is sitting on Tron and with plentiful transactional activity, Tron could be considered the global settlement network. According to Brevan Howard, “More stablecoin activity occurs on Tron than on any other blockchain. Year-to-date, transactions on the Tron blockchain account for 49% of weekly active addresses, 37% of transactions and 35% of volumes.”

What’s not working?

• While Tron network has become the preferred blockchain for stablecoin settlements, they are also touted to be used by nefarious actors. Mriganka Pattnaik, CEO of the New York-based blockchain analysis firm Merkle Science, stated that terrorist organizations are increasingly choosing Tron over Bitcoin due to their faster transaction times, lower fees, and increased stability. This could lead to unwarranted regulatory intervention that can impact the blockchain.

• Its founder Justin Sun has been in the limelight for the wrong reasons. https://cointelegraph.com/news/circle-denies-claims-illicit-financing-ties-justin-sun

• TRX, the coin, didn’t do well price wise even in the last bull run.

Our prediction on returns from today over the next 2 years: 2-4x

4. Polygon

Current market cap: $7.1 billion; Current coin (MATIC) price: $0.77

All-time high (ATH): $2.9; Multiple to ATH: 3.8x

What’s working?

• MATIC remains one of the most underrated tokens of the crypto market. While we could witness short spikes due to narratives, the token is currently trading at a significant discount at $0.7 to its peak of $2.9. MATIC has done well against BTC this bear market which is a clear indication of its performance going forward.

• zkEVMs: Zero-knowledge rollups compatible with the Ethereum Virtual Machine — are poised to become elite solutions in Ethereum's scaling ecosystem, and Polygon became one of the first movers here upon launching the Polygon zkEVM mainnet beta back in March 2023.

• Polygon 2.0 upgrade: The Polygon 2.0 upgrade followed by the POL token launch is a remarkable development to Polygon blockchain. One of the major aspects of this upgrade is to develop a new governance structure that is supposed to counteract the SEC’s allegation of declaring MATIC as a security. Additionally, POL token is supposed to improve network’s activities with more use cases.

What’s not working?

• The network, although have robust fundamentals, is struggling to garner developers. To incentivise, they recently launched an $85 million grant program via its native token, MATIC — designed to draw builders to its ecosystem.

• Competition from Arbitrum, Optimism, and other scaling solutions.

Our prediction on returns from today over the next 2 years: 5-10x

5. Solana

Current market cap: $25.6 billion; Current coin (SOL) price: $60.4

All-time high (ATH): $245; Multiple to ATH: 4x

What’s working?

• Buzzing Ecosystem: Solana boasts an active community, a benefit to DeFi protocols within its ecosystem. While their NFT marketplace, Magic Eden launched a multi-chain wallet specializing in non-fungibles, its leading liquid staking protocol Jito recently announced Airdrops to their users.

• SOL, the asset, has recovered well after the FTX debacle while the blockchain is no longer facing ‘restart’ issues that plagued it earlier.

• Recovery of TVL: It is no secret that Solana has been the best performing large cap crypto asset of the year, up nearly 6x from its lows during end of 2022. Partially a by-product of price action, the USD denominated value of TVL on SOL has shown a remarkable comeback, currently sitting at $1.1 billion.

What’s not working?

• Solana uses the Rust development language, which has 2.2 million active developers, compared to Ethereum (ETH), which uses JavaScript with 17.4 million developers. This has resulted in Solana accounting for only 6-7% of weekly active crypto developers over the past 18 months.

• Solana’s reputation and its recent rally relies majorly on their upcoming Firedancer, a next-generation independent validator client. It is expected to process 1 million transactions per second (tps). If the project were to hit a snag, this could negatively impact the price movements.

Our prediction on returns from today over the next 2 years: 5-10x

Key takeaway

Clearly, momentum is on Solana’s side right now. Institutional investors are banking heavily on it and it seems to following Ethereum’s path in 2020 (read our earlier piece here). A lot of good things must go its way to enable becoming the next Ethereum.

Polygon (MATIC) is our next best bet for emerging out strong in the upcoming bull market. While it is in a competitive market, it has demonstrated its ability to lead in adoption as well as outdo BTC and ETH as an asset in the bear market of 2022.

Out of Cardano, Tron and Ethereum, we believe that sticking to Ethereum is a better choice for its fundamentals and narrative around a potential ETF once Bitcoin spot ETF gets approved.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.