In recent weeks, Bitcoin has remained stable, while ERC-20 altcoins, including DeFi and gaming tokens, have suffered significant losses, underscoring their vulnerability.
Bitcoin Stability and Investor Appeal
Bitcoin holds a steady position from early January as tracked by Glassnode data. Amidst market turbulence, traders have increased their Bitcoin trades, viewing it as a safe investment. Several institutional players choose Bitcoin over unpredictable altcoins. The widespread view of Bitcoin as a secure store of value continues to strengthen, driving higher trading volumes.
Decline of DeFi and Gaming Tokens
Among ERC-20 tokens, DeFi and gaming tokens have shown sharp downturns. The prices of Aave and Compound have both plummeted due to decreased interest in decentralized finance protocols. Since mid-January, decentralized exchange tokens like Uniswap and Sushiswap have lost over 30% of their value. Reduced interest in metaverse and gaming tokens, such as Axie Infinity and The Sandbox, further contributes to this decline. Decrease in user activity and reduced total value locked (TVL) in DeFi emphasize this trend.
Historic Market Capitalization Decline of Altcoins
Over the past weeks, the combined market value of altcoins has decreased by $234 billion. According to Glassnode, only 12 trading days in history have seen more substantial altcoin devaluation. The current decline is comparable to the market crashes in 2021 and the November 2022 FTX fallout. In response, investors are moving funds into Bitcoin, aiming to reduce risk exposure.
The declining market cap of altcoins underscores their vulnerability in bear market conditions, while Bitcoin continues to strengthen its position as a robust financial asset. ERC-20 tokens, particularly in the DeFi and gaming sectors, face significant challenges requiring a new wave of adoption and improved market sentiment.
