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Layer-one tokens surge - and analysts say they are just getting started

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(Kitco News) - Layer-one (L1) tokens have consistently been among the top performers during cryptocurrency bull markets as they serve as foundational blockchains for the entire ecosystem, making it possible for all other sectors – from gaming and non-fungible tokens (NFTs) to decentralized finance (DeFi) – possible.

So it’s no surprise that some of the top L1 protocols are leading the way as the current bull market cycle starts to ramp up, and according to analysts, past cycles show that these tokens still have a long way to go before they hit their peak.

The protocols currently attracting the attention of investors include Solana (SOL), Avalanche (AVAX), and a new arrival to the scene, Kaspa (KAS), with each offering different benefits to users.

Institutions show interest in Solana

Solana has been one of the top-performing coins in 2023, climbing from below $10 at the start of the year to its current price of $62.12, an increase of nearly 550%.

SOL/USD Chart by TradingView

SOL hit a new yearly high on Wednesday after ARK Invest CEO Cathie Wood described the network as a major infrastructure player in the wider blockchain ecosystem and lauded its efficiency and cost-effectiveness.

“Ether was faster and cheaper than Bitcoin in the day – that’s how we got Ether,” Wood said during an interview on CNBC. “Solana is even faster and cost-effective than Ether.”

In a note shared with Kitco Crypto, Guy Gotslak, co-founder and president of My Digital Money, said the recent surge has put Solana up 170% in the past month, “easily outperforming Ethereum more than seven times over.”

“This is the polar opposite of what investors anticipated because, in September 2023, the Delaware Bankruptcy Court authorized the sale of assets from the collapsed exchange FTX, which included a substantial $55.75 million SOL,” he said.

Gotslak said the recent upswing in SOL’s value “might be linked to the realization that some of the tokens from the bankruptcy sales are either vested or locked.” He noted that “the FTX liquidation plan imposes a weekly cap of $100 million on sales, mitigating initial fears about asset liquidation and giving rise to optimism among investors about the sales' limited impact.”

“SOL's impressive gain is also driving its futures open interest to a significant $745 million, a peak not seen since November 2021,” he said. “Although derivatives markets may seem to be a primary driver of SOL's rally, there's compelling evidence of growth in deposits and decentralized application (DApp) usage within the Solana ecosystem. In the past month alone, there's been a 10% increase in deposits in Solana's dApps.”

Gotslak said he sees the price of SOL climbing above $100 next year, and long-term, thinks “Solana is going to be Ethereum’s closest competitor.”

“In 10 years, $2,000 is very viable,” he said.

Arthur Firstov, chief business officer at Mercuryo, also sees the increase in user adoption of Solana as the driving force behind the rally.

"Many people still think Solana is pumping because of FTX, but this is not the case,” he said. “Users who try out the chain, DEX, NFTs, Wallets, performance, cost, and marketplaces will see how advanced and user-friendly this protocol is. Overall, the increased dApp use, compressible NFTs, and reduction of on-chain costs to 5 SOL for 1 million NFTs enhanced usage and drove demand for Solana across the board.”

Firstov also highlighted that “Solana now has a big institutional embrace as depicted by the hike in Grayscale’s Solana Trust.” Data provided by Coinglass shows that the Grayscale Solana Trust now has a 342% premium over the trading price, a notable sign as it implies that institutions are willing to pay significantly more than SOL’s current market value to gain access to an institutionally available product.

These developments “all ride on the back of a positive performance-first environment with good builders and entrepreneurs,” Firstov said. “Solana might also see enhanced enterprise adoption through Firedancer, the blockchain’s pathway to 1 million TPS (transactions per second), a high-performance protocol that compares to VisaNet’s 65,000 and Mastercard’s 5,000.”

“In all, I remain bullish on SOL for the long term, as we expect it to at least retest its all-time high of $260 in the next bull run,” he concluded.

Even after a 550% increase in 2023, this altcoin still has 57x potential - VanEck

Major adoption announcement for Avalanche

The source of Avalanche’s newfound momentum can be attributed to the network being utilized in J.P. Morgan and Apollo Global’s proof-of-concept pilot project, which is part of the Monetary Authority of Singapore's Project Guardian.

During the pilot, Layer Zero connected JPMorgan’s Onyx Digital Assets with a permissioned Avalanche Evergreen Subnet, which facilitated subscriptions and redemptions for funds offered by WisdomTree, a leading asset manager and pioneer in fund tokenization.

“This initiative under Project Guardian fundamentally aligns with Ava Labs’ mission to provide the tools and tech to digitize and tokenize the world’s assets while harnessing the speed, scalability, and customizability of Avalanche,” said John Wu, president of Ava Labs. “We are proud to be working with such industry leaders as they help drive forward the future of finance.”

The announcement of Avalanche’s involvement with Project Orchid resulted in the price of AVAX rallying 41% over the past two days to hit a high of $24.11. On Oct. 19, AVAX bottomed out at a low of $8.68, which means that in the past month, it has rallied more than 177%.

AVAX/USD Chart by TradingView

According to market analyst Altcoin Sherpa, “$29 is the next target if price can remain above this current level,” and multiple analysts see AVAX making a run at its all-time high of $146.22 at some point during this bull market cycle.

Kaspa benefits from a Binance listing

Kaspa is a newer proof-of-work blockchain with a directed acyclic graph (DAG) architecture that says it is the “fastest open-source, decentralized, and fully scalable Layer-1 in the world.”

According to the project’s website, the Kaspa network is “The world’s first blockDAG – a digital ledger enabling parallel blocks and instant transaction confirmation – built on a robust proof-of-work engine with rapid single-second block intervals.”

Hype around the project has been building since the start of the year as the KAS token was slowly listed on cryptocurrency exchanges. On Jan. 1, KAS traded at a price of $0.0052, and it has since surged 2,554% to hit a new all-time high of $0.148 on Thursday.

KAS/USD Chart by TradingView

The main source of the recent momentum was the KAS token being listed on Binance, the world’s largest cryptocurrency exchange by volume. Binance listings have a history of sparking significant price rallies as they are often the first time that many investors have the chance to access a token, and the large pool of Binance investors are also well-known for getting a serious case of FOMO for new and promising projects.

While it's too early in the tokens’ existence for analysts to give a reliable price prediction, crypto trader Lucky, who has been involved in the industry since 2015 and boasts 2.2 million X followers, sees the token as being a top performer during the bull market.

“I expect that in the coming year, KAS will continue its upward trajectory, and I firmly believe that it has the potential to secure a position among the top 5,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.