This week was the culmination of a lot of promises years coming in the crypto industry. President Trump ended some of the crypto regulation by enforcement actions taken over the last few years, and the Securities and Exchange Commission (SEC) pulled back SAB 122, which kept banks from holding crypto for customers. But these moves didn't help the market, and many altcoins fell double digits on the week.
According to data provided by S&P Global Market Intelligence, Cardano (ADA 3.60%) was one of the biggest losers, falling 13.6% over the past week, Polkadot (DOT 1.83%) fell 14.4%, and Uniswap (UNI 3.95%) fell 15.4%.
Crypto regulations don't cause a buying frenzy
This week seemed more like "sell the news" in crypto because it was a lot of news the industry was looking for, but buyers didn't show up. In fact, whale investors sold 180 million Cardano tokens this week despite the potentially better market conditions.
I've been saying for months that better market conditions for crypto from a regulatory perspective wouldn't necessarily lead to higher prices for all cryptocurrencies. Tokens need to have demand to move higher, and companies building innovative products on the blockchain doesn't necessarily lead to higher demand for the tokens themselves.
The Trump meme coin undermines the bull case for some cryptocurrencies
The other big news item of the week was the launch of the Trump meme token last weekend, which wasn't launched on the traditionally popular Ethereum (ETH 3.77%) Layer-2 solutions like Polkadot; it was launched on Solana (SOL 5.58%). As a result, it's also not using common Ethereum swapping tools like Uniswap; it's using Solana's native token exchanges and wallets to an incredibly effective scale.
Solana has completed nearly 300 million transactions in the past month and has held up well under the stress of the new meme coin. And if it can handle this, why use slower and more expensive Layer-2 solutions?
Uniswap is also losing market share on a volume basis and would be threatened if crypto activity moved to Solana, where smaller transactions make more sense because of much lower fees than most competing blockchains.
In short, Solana has sucked the air out of the room for competitors from Polkadot to Cardano, and it's not surprising to see them fall this week.
Now, the rubber hits the road
What's clear now is that crypto has momentum, and there will likely be a lot of innovation on the blockchain, particularly as advisor David Sacks said today that meme coins and non-fungible tokens (NFTs) are collectibles. But what does that mean for native blockchain tokens?
It's not clear that all blockchains will get traction, and even if they do, the value may not be in the token but rather what's built on top of the blockchain. I wouldn't be surprised to see the market sink even lower as some of the election and meme coin euphoria wears off, and builders start to build real businesses. But that could take years to materialize, and that's not the kind of patience the crypto market usually has.
