There's been a lot of money made in cryptocurrency over the years, and most digital currencies are still trading higher over the past 12 months. Unfortunately for some investors, some of the more popular denominations have now declined over the past year.
Bitcoin (BTC -1.36%), Cardano (ADA -2.65%), and Polkadot (DOT -3.96%) have all fallen by at least 30% over the past 365 days. They are the exceptions to the rule -- for now -- but let's take a closer look. Let's see if we can break down why they have fallen out of favor.
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Bitcoin: Down 33%
Bitcoin is the world's most valuable crypto by market cap. It's no longer a $1 trillion crypto, but even at a mere 12-figure market cap it is larger than the next 15 most valuable cryptocurrencies combined.
Bitcoin trading for a third less than it was a year ago as of Thursday night may be surprising, but it also reflects the strong rally that was taking place in digital currencies through the first couple of months of 2021. It also doesn't help that Bitcoin -- despite its gargantuan size and equally large mindshare of the crypto market -- hasn't developed enough of a use case. It continues to be a costly digital currency to create and to use, and its blockchain technology hasn't evolved as quickly as some of its lesser-known peers.
The good news for Bitcoin is that it continues to be the most popular crypto. When mainstream companies decide to dip their toes into the cryptocurrency market it is often through embracing Bitcoin.
Cardano: Down 30%
A whopping eight of the 10 most valuable cryptocurrencies are trading higher over the past year. We already covered Bitcoin as the top dog that also happens to be in the red. Cardano is the other major player that has lost ground over the past year.
Cardano has an impressive five-step roadmap to catapult the crypto to elite status with a self-sustaining system, but the slow and meticulous peer-reviewed evolution of the currency can weigh on the market's patience.
It has its pedigree papers in good working order. Cardano was started by a co-founder of the planet's second-most valuable crypto, Ethereum. The finish line is also tantalizing. Cardano is already fast and efficient, able to process 250 transactions per second. Its goal is to get to a million transactions per second. As a proof-of-stake platform, Cardano doesn't have the efficiency and eco-unfriendly limitations of Bitcoin and Ethereum (even though Ethereum hopes to finally complete its migration to those protocols by this summer). Cardano is also finally starting to make ground in decentralized finance, though it currently lags 27 other chains in terms of total value locked (the sum of assets locked into DeFi protocols). The upside here is that over the past month it has grown its total value locked faster than all of those 27 other platforms on a percentage basis.
Polkadot: Down 54%
The claim to fame for Polkadot is its ability to get different blockchains to run independently in a single network. Last year it was a star of the Web3 movement, where web services are run by open protocols. The Web3 chatter has dimmed as the crypto market itself has contracted.
Polkadot's appeal is still there as a decentralized utility platform. As use cases begin to build up for the various leading digital currencies you need parallel blockchains (or parachains) like Polkadot so data can flow between, say, Bitcoin and Ethereum. Parachains take the processing demand off of the primary blockchains, and that's a good thing given Polkadot's speed and scalability. Polkadot has fallen harder than many digital currencies, but it should also benefit as investor interest returns.
Bitcoin, Cardano, and Polkadot have been hit hard over the past year, and naturally they've taken even bigger hits from last year's all-time highs. The bullish fundamentals are still percolating, but investors know going in that the cryptocurrency market is going to be volatile.
