THORchain (RUNE -5.63%) is off to a nice start to 2022, posting a 57% year-to-date gain after the first quarter as it approaches the top 40 cryptos by market cap. The last 30 days have been even better for THORchain, as it has gained more than 100% in just a month. So what is THORchain, why is it surging, and can it keep up this scorching performance?
What is THORchain?
THORchain is a decentralized exchange, and RUNE is its native token. A comparison would be Uniswap, which is one of the biggest, best-known decentralized exchanges.
However, THORchain differs from Uniswap in an exciting way. While Uniswap allows the exchange of ERC-20 tokens like Shiba Inu and Polygon, THORchain enables the exchange of layer-1 tokens like Terra and Bitcoin.
Image source: Getty Images.
Why is THORchain surging?
THORchain has soared on the implementation of synthetic assets. . Like Waves' Neutrino and Terra's Mirror, THORchain enables users to buy and trade synthetic assets, like synthetic Bitcoin. A synthetic asset is a derivative that gives you exposure to the price of an asset like Bitcoin without actually needing to hold that asset.
Synthetic assets are not just limited to cryptocurrencies but can include fiat currencies like the dollar or yen, stocks like Tesla, or even commodities like oil and gold. What makes THORchain unique is that these assets are backed by half of the underlying asset (i.e., Bitcoin or the U.S. dollar) and half RUNE, THORchain's native token.
Another interesting development is that in the future, THORchain will allow users to earn yield on these assets by simply putting them in a vault, which will make it more approachable for new users, who may not be familiar with all the complexities of the process known as yield farming.
An additional reason for THORchain's big month was the integration of Terra and TerraUSD into the THORchain network. In addition to Terra and TerraUSD, other tokens available on THORchain include Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and the ever-popular Dogecoin.
Can it keep going?
While THORchain has already rallied on the aforementioned developments, there are still additional catalysts to look forward to that could mean the rally is just getting started. THORchain's developers have said that in June, decentralized lending and saving (known as Thorfi) will go live on the platform, which should draw additional interest.
Total value locked on the platform spiked from just over $300 million at the end of February to more than $550 million by the end of March, representing an 85% gain. Volume on the Thorfi exchange is heating up at the same time, increasing to over $100 million a day for the first time at the end of March.
While THORchain is up for the year, it is still down more than 40% from its all-time high of $20.92 set last May , so with new developments and improvements ramping up, it's possible that it could return to or surpass that previous high watermark. Furthermore, at a market cap of just under $4 billion, THORchain has plenty of runway ahead of it, especially as interest in the project, volume on the exchange, and total value locked all soar.
