Following its bi – monthly survey of various fund managers, CoinShares released results showing an increase in institutional investment in altcoins such as Cardano, XRP, and Polkadot at the expense of Ether. What explains such a reversal?
Why such interest in Cardano, XRP and Polkadot?
Fund managers contacted by CoinShares revealed in their monthly survey that investor allocations to Cardano, XRP, and Palkadot are increasing, at the expense of Ether.
Increased investor interest in cardano and XRP over ether is believed to be due to a number of factors such as speculation as well as recent developer activity on the respective blockchains. Moreover, for many observers, the rise in the price of Cardano and XRP compared to the ether would also be some of the reasons behind this reversal of the cost of ether.
In fact, it is worth noting that Ethereum was built as an open source web portal by design. As such, this platform allows the construction and incorporation of many other applications. The biggest advantage of Ethereum over the various other blockchains is that it is the first to offer smart contracts. As a result, the Ethereum platform has grown tremendously over the years, with the rapid growth of various transactions. However, the challenge of scaling up the platform has led to higher transfer costs, especially during network peak times. Another shortcoming of the Ethereum network is the lack of interoperability between blockchain platforms.
Solutions to revive Ethereum?
There are various solutions to the challenges mentioned above. They gave birth to the concept of the so-called “Ethereum Killer” blockchains. This is why competitive blockchains were rapidly developed to overcome the difficulties observed at the Ethereum platform level. Cardano and Polkadot are among these new blockchains. The latter benefited from these new solutions.
Full-smart contracts are now possible thanks to the Alonzo update on the Cardano network in September 2021. This update immediately helped with the minimization of non-interlaced signals (NFT) and the implementation of decentralized multitasking (DApp). With fast speeds and low transaction costs, these solutions have made the Cardano ecosystem a direct competitor to the Ethereum network. Thus, the high cost of transactions and scalable challenges contributed significantly to diverting investor funds towards Cardano at the expense of Ethereum.
According to a report by Electric Capital Developer in 2021, Polkadot is one of the largest and fastest growing ecosystems, with over 250 active developers monthly. In fact, this ecosystem grew faster than on the Ethereum platform during the same period.
Meanwhile, Ripple is caught up in a legal battle with the U.S. Securities and Exchange Commission (SEC). However, the first court decisions seem to be in his favor. Such speculators are predicting a victory for Ripple against the SEC and this has led to a rise in the price of XRP.
Should we expect more outflows from Ethereum to Cardano, Polkadot and XRP? The race to be on the blockchain option is not just warming up. Developer activity across the blockchain is only expected to increase to make them more efficient and secure.
During May 2022, it was noted that the average fees for Ethereum transfers dropped to their lowest level in more than a decade, at less than three dollars per transaction. While this is good news for Ethereum ecosystem users, it is not clear how long these transfer fees would last. Many cryptocurrencies have been blamed by many crypto experts simply for the recent general collapse of the cryptocurrency market which has led to a decrease in the number of transactions on the Ethereum network.
According to Ethereum co-founder Vitalik Buterin, the long-awaited platform update is scheduled for August 2022. This update would mark Ethereum’s transition from a Proof of Work to Proof of Promise consensus mechanism. The Ethereum merger upgrade may be the much-needed spark of the Ethereum network to extend its top-level advantage over competitive blockchain.
In addition, it should be noted that a better restructuring of its platform will allow Ethereum to regain confidence in these institutional investors and to prioritize those competitors Cardano, Polkadot and Ripple.
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