Why Are ADA, SOL, LUNA Hitting All-Time Highs as Bitcoin Lags Behind?

Well, as is usually the case with crypto, the answer has multiple parts. On the one hand, the likely return of a bull market means that excess cash is spilling over into altcoins, and that some investors are feeling more confident about risking money on more speculative coins. On the other, the best-performing altcoins are generally experiencing growth and adoption of some kind or another, with important upgrades, launches and developments making them more attractive to users and investors alike.

Updates, Launches and Developments = All-Time Highs in a Bull Market

Starting with the biggest coin (by market cap) to have broken its ATH recently, Cardano (ADA) has benefitted from growing excitement over the launch of smart contracts on its platform. This will enable it to host decentralized applications, including DeFi and NFT platforms.

In other words, it will turn it into a fully fledged Ethereum competitor, with founder Charles Hoskinson claiming earlier in the year that over 100 companies are waiting to launch on Cardano. Accordingly, the market has grown more excited about ADA as Cardano has drawn closer to rolling out smart contracts, which are currently due on September 12.

Source: Twitter

When this tweet was posted on August 13, ADA was as low as $1.70. However, in the days that followed it proceeded to rise, reaching as high as $2.95 on August 23, as anticipation grew. This represents a 73.5% gain in ten days, which is not bad work if you can get it.

It’s a similar story with many of the other altcoins that have peaked in recent weeks. In particular, what’s important to note is that many of the ATHs occurred during a general market upturn, with signs suggesting that a new bull market was in the process of beginning. Bullishness creates a greater appetite for ‘the next big thing,’ for any coin that looks like it has a fundamentally good chance of outperforming the market.

As such, traders were more likely to latch onto any coin — such as ADA — which has good news to share.

This includes Terra (LUNA), which also broke its all-time high as recently as August 23, hitting $34.25. LUNA is a cryptocurrency which backs the TerraUSD (UST) stablecoin, and which has to be burned in proportion to the amount of new UST being minted. Given that the supply of UST has grown from $2 billion to $2.3 billion in less than a month, a considerable amount of LUNA had to be burned. This not only drove up LUNA’s price, but also attracted investors who wanted to get in before too much was burned.

At the same time, the growth in the UST supply comes amid a growth in the Terra ecosystem, with the stablecoin platform working with an increasingly wide range of other platforms.

Source: Twitter

Again, something very similar can be said for Axie Infinity (AXS). The game has grown from having 100,000 daily active users at the beginning of June, to having 1.3 million as we near the end of August. This is impressive growth, and given that the AXS governance token powers much of the game’s ecosystem, it too has grown in popularity. Having stood at just under $5 at the beginning of June, it reached a record high of $82.40 on August 21.

Basically, impressive growth in a platform’s user base or functionality has led, within a bullish market, to investors eagerly throwing their cash in with certain altcoins. This is precisely what also happened with Solana (SOL), which also hit an ATH on August 21, of $81.25. It has ridden a wave of growing use, with Solana’s total value locked in rising from $1 billion to $2.5 billion in less than a month to the date of its ATH.

Bridges

However, there’s one important factor in SOL’s climb to $81.25, and one that also figures in the strong performance of numerous other altcoins recently. That is, it has benefited from the launch of a bridge — called Wormhole — between Solana and Ethereum (and other blockchains), letting users transfer tokens from one chain to another.

Opened on August 9, this has expanded Solana’s ecosystem considerably, seeing as how TVL was only $1.5 billion on August 9, before hitting $2.5 billion on August 20.

Something similar applies to Terra (LUNA), since it too is supported by the recently launched Wormhole. It also applies to another altcoin — Avalanche (AVAX) — which has been outperforming the market recently, despite having not yet passed its ATH from this February. It announced the launch of Avalanche Bridge at the end of July, letting users transfer tokens to and from it and Ethereum. The Bridge has now grown to facilitating some $100 million in transfers per day, indicating just how much connecting with other chains can boost adoption and usage.

Source: Twitter

The existence — and growing importance — of bridges means that various blockchains are essentially able to pool their users and wealth together, pushing the value of native tokens (such as SOL, LUNA and AVAX) higher than they had been previously.

Likewise, the recent performance of THORChain (RUNE) also has something to do with cross-chain bridging. THORChain allows for direct swaps of one cryptocurrency (e.g. bitcoin) for another (e.g. ethereum), using a decentralized liquidity pool and its own native token, RUNE, to achieve this.

Put differently, it has created demand for RUNE by providing a bridge between multiple ecosystems, with its TVL growing by 900% since mid-April. In parallel, the value of RUNE has risen by 182% in the last 30 days, making it one of the best-performing coins of the past month.

Bear Markets

Expect bridges and bridging to become increasingly important in the future, as more platforms become interoperable and as they seek to pool their resources — and value — with other platforms.

Also continue to expect investors to rush after new and exciting platforms during expansionary markets, particularly platforms that have upgrades and launches on the horizon, or news of significant adoption. This has been the case with SuperRare (RARE), for instance, an NFT platform which has seen its recently launched native token hit an ATH only yesterday (as of writing), on the back of the platform’s popularity and of sustained interest in NFTs.

Of course, the flipside of this is that, if we enter a sustained bear market at some point later this year (or the next), expect many (particularly smaller) altcoins to fall harder than major cryptocurrencies such as bitcoin, as investors become risk-averse. That said, with crypto remaining at an early stage in its development, it’s possible we’ll continue to see new platforms with genuinely meaningful use cases continue to hit new all-time highs.