Smart-contract tokens could offer better returns for investors

Smart-contract tokens could offer better returns for investors

For investors living on the digital edge, it is starting to look a little old-fashioned.

Some are turning away from the original coin designed as an alternative to regular cash in favor of its descendants, which have created native tokens of platforms that host smart contracts and apps, because of high growth.

MarketVector's Smart Contract Leaders Index, which tracks major tokens of this kind - including ether, dot and solana - is up 36% in 2023, surpassing evenBitcoin's 33% rise. Solana's token is up 76% this year.

Bundeep Rangar, CEO of Fineqia, said he expected the biggest returns from smart contract tokens on platforms that support DeFi apps.

He said that those are ones that you will find capital appreciation, similar to what a growth stock will be.

According to CoinShares, investors in the $1 trillion world of digital assets appear to agree that investment products tracking ether and solana have seen small inflows even as bitcoin products suffered four consecutive weeks of outflows.

Around seven of the top 20 biggest assets are smart contract tokens, including ether and dot, solana and cardano.

BofA analysts pointed out that smart contract tokens and the applications they power are similar to growth stocks in the equities world, typically technology shares.

Analysts at Bank of America wrote in a Feb. 24 research note that the year of 2023 will be the year of token price divergence.

The cord may be fraying as smart-contract tokens take up its super-growth mantle, as it has long traded in tandem with tech stocks.

The 30 day correlation with the Nasdaq went negative on February 23 for the first time since December, where a measure of 1 indicates that the two assets are moving in lockstep.

Some watchers say the strength in smart-contract token this year points to a solid performance by the most established DeFi protocols despite the market ructions of 2022. The growth of projects and their associated tokens could be hit by the global macro outlook and central bank policy, they cautioned.

James Butterfill, head of research at CoinShares, warned that it was too early to call a major divergence in the field of criptocurrency. The shadow of the sector still looms large, with its share of the total market value up slightly to 40%, from 38% at the beginning of the year.

Butterfill said such departures could be a sign of the growing up of the criptoverse.

We should be increasingly adopting the view that the market will become more sophisticated and more mature as it evolves, and we will start to see price divergence.