Bitcoin is starting to look a little old-fashioned to investors who are on the edge of the digital economy.
In response to a surge in growth, some are turning away from the original cryptocurrency - designed as an alternative to regular cash - in favor of its descendants created as native tokens of blockchain platforms that host smart contracts and apps.
MarketVector's Smart Contract Leaders Index, which monitors major tokens of this type - such as ether, dot and solana - is up 36% in 2023, outpacing even bitcoin's 33% rise. Solana's token is up 76% this year.
Bundeep Rangar, CEO of asset manager Fineqia, said the biggest crypto returns will come from smart contract tokens on platforms that support decentralized finance DeFi apps.
They are ones you will find capital appreciation, similar to what a growth stock will be, he said.
Some investors of the $1 trillion world of digital assets appear to agree, according to CoinShares data which shows investment products tracking ether and solana have seen small inflows even as bitcoin products suffered four consecutive weeks of outflows.
The top 20 biggest crypto assets are smart contract tokens such as ether and dot, solana and cardano.
BofA analysts also pointed out that smart contract tokens and blockchain-based applications they power as similar to growth stocks in the equities world, typically technology shares.
We expect 2023 to be the year of token price divergence, analysts at the Bank of America said in a note on February 24.
Bitcoin has long been associated with tech shares, but that bond may be fraying just as smart-contract tokens take up its crypto super-growth mantle.
On Feb. 23 the cryptocurrency's 30-day correlation with the Nasdaq turned negative for the first time since early December, where a measure of 1 indicates that the two assets are moving in lockstep.
The relative strength in smart-contract tokens this year demonstrates a solid performance by the most established DeFi protocols despite the market ructures of 2022. But they warn that global macro outlook and central bank policy could hit the growth of crypto projects and their associated tokens.
It's also too early to call a major divergence in crypto, said James Butterfill, head of research at CoinShares. Bitcoin's shadow still looms large over the cryptocurrency market, with its share of the total crypto market capitalization up slightly to 40%, from 38% at the beginning of the year.
But butterfill said such departures could be a potential sign of the cryptoverse growing up.
We should be increasingly adopting the view that the market will become more sophisticated and more mature as it evolves, and we will begin to see that price divergence.