2021 has been Bitcoin’s best year yet, with the flagship cryptocurrency reaching a new all-time high above $64,000. Speculation is rife that it could go even higher before the year is out. However, as impressive as Bitcoin’s performance has been, 2021 is turning out to be the year of the platform token. Cardano is now ranked as the #3 cryptocurrency, while Solana was a relatively recent surprise entrant to the top ten. So what’s the story with platform tokens, and can we expect the trend to continue?
To create a baseline for assessing performance, we took the top platform tokens by market capitalization and analyzed their performance in 2021. Based on the percentage price increase between January 1 and the most recent all-time high, five platform tokens have posted gains above 1,000% this year. They are Solana (SOL,) Terra (LUNA,) Avalanche (AVAX,) Cardano (ADA,) and Polygon (MATIC.)
Seasoned investors from the traditional markets may be tempted to write off such huge gains as hype. After all, Dogecoin also made a surprise re-entry to the top ten cryptocurrencies earlier in 2021 too. However, in the case of the platform tokens, it’s immediately evident that legitimate on-chain activity and adoption underpin these impressive yields.
Solana Leads the Charge
Solana’s SOL token leads the pack, rising by over 14,000% to hit an all-time high of nearly $215 in early September, following a slew of news around NFT and DeFi activity happening on the network.
The platform’s first big NFT launch, titled “Degenerate Apes” sold out in under ten minutes when it launched in late August, boosting trade volumes of SOL by over $2.5 billion. Since then, the news has barely stopped coming. FTX, one of the fastest-growing exchanges, has also selected the platform to launch its decentralized exchange, later also announcing it was planning to open a Solana-based NFT marketplace.
A network outage in mid-September seemed to bring the upward price movement to a sudden stop. Nevertheless, at the time of writing, SOL was still up over 9,000% year to date.
LUNA and AVAX in Hot Pursuit
Terra’s LUNA is the second-best performer of 2021, rising over 6,800% from its January start of $0.65. LUNA’s performance perhaps comes as a surprise to many in the West, as the Terra platform isn’t as widely used as in its native South Korea. However, it’s massively popular, with its Chai payments application attracting around 2.5 million users per month. The project also recently completed a Wormhole integration, connecting Terra to Ethereum. According to DeFi aggregator DeFiLlama, the total value locked in Terra-based DeFi apps has increased three-fold to over $8 billion since June 2021.
Avalanche’s AVAX has been another success story, posting meteoric gains of nearly 2,000% in early September. In this case, the DeFi-focused project has been wooing institutional investors, recently raising $230 million in a sale of AVAX to boost the platform’s adoption. The news came after Avalanche launched a $180 million liquidity mining incentive fund to attract DeFi developers to the platform.
Cardano’s ADA has still yet to host an operational app, but it hasn’t stopped investors pumping the price by over 1,600% to its all-time high of around $3.10. In this case, the price action has mostly been as a result of development activity, as the platform geared up for its long-anticipated “Alonzo” upgrade, introducing smart contract functionality to the platform.
Finally, Polygon’s MATIC token is the last of the five to post four-digit gains in 2021, rising 1,400% to hit its all-time high above $2.65 in May. Although the price has since dropped off, the fundamentals driving the increase were sound. In the run up to May, the project delivered a raft of adoption news, with high-profile apps including Aave, Curve Finance, Decentraland, and Terra Virtua all migrating to the Polygon network to take advantage of its scalability without compromising on Ethereum compatibility.
Can the Past Predict the Future?
Analyzing past price performance is one thing, but what can this run on platform tokens tell us about what comes next? It seems like a no-brainer, but the events of 2021 confirm that demonstrating sound fundamentals and real-world adoption are a reliable driver of price. So looking out across the platform landscape, it’s possible to anticipate which projects may look promising for further price action.
Although it hasn’t yet delivered the same performance as other platforms in 2021, Ethereum’s increases have nevertheless been impressive, delivering nearly 500% in the run up to its all-time high in May. The project has launched two upgrades this year, introducing a fee burning mechanism that many believed would positively impact the price.
However, the biggest news is still to come. When the current Ethereum chain “merges” with the Ethereum 2.0 beacon chain, the platform will abandon proof-of-work and become a full proof-of-stake network. It will be the most significant milestone in Ethereum’s history, and as a result, is the most promising indicator of any upcoming price action.
A Shock to the DOT Supply?
Polkadot’s DOT is another top-ranking platform token that still has mileage to deliver on its roadmap. So far this year, it’s performed similarly to ETH, returning gains above 400%. However, like Cardano, the platform isn’t yet supporting any applications. That will change when Polkadot opens up the auctions for its coveted parachain slots, hopefully later this year. Projects are called to bid for a place on the Polkadot network in DOT tokens, and they can also entice investors to stake their DOT in a crowd loan process, providing significant incentives to put more DOT out of circulation. Therefore, DOT also seems like one of the platform tokens to watch.
Other recent rising stars worth watching closely are Algorand’s ALGO, up over 800% to an all-time high around $3.30, and Cosmos’ ATOM, up over 500% to its most recent peak above $38.
Predicting the future is always a tricky business, particularly in crypto. However, the idea of investing in projects with strong fundamentals has been boosted significantly in 2021. Meme coins may come and go, but projects with robust infrastructure, legitimate adoption, and ambitious development plans remain a more attractive gambit for investors.