December 9, 2023

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Bitcoin (BTC) Ether (ETH), Ethereum blockchain native coin SOL, Solana blockchain native coin AVAX, Avalanche blockchain native coin

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These are all select layer 1 protocols – critical components of blockchain technologies and settlement mechanisms for decentralized transactions. In other words, they form the foundation of what can be built on top of the blockchain and how fast transactions can be processed. This makes them a key component of the fastest growing sector of the blockchain economy: decentralized finance, or DeFi, a borderless, friction-free, cheap and fast alternative to the current financial system.

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“This means you can lend or borrow within a peer-to-peer network using smart contracts,” says Zaghari. Smart contracts are programs stored on a blockchain that execute automatically when predetermined conditions are met.

“Solana and Avalanche, among others, compete with Ethereum; [therefore] Holding these core Layer 1s, including Ethereum, is a way to diversify your holdings with exposure to decentralized applications (DApps),” claims Zagri.

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DApps facilitate access to DeFi services such as lending, produce cultivation and trading, among others.

regulatory constraints

Government regulations could have a huge impact on the value of digital assets. “Often, selling pressure on both altcoins and bitcoin is usually based on political and regulatory factors,” Zaghari said.

Some governments are not comfortable with the decentralized and unregulated nature of cryptocurrency, and they are looking for ways to control the crypto market. Countries such as China and Indonesia have imposed outright bans, while others have proposed bills to limit crypto. Such moves can negatively affect the crypto price.

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Recently, digital assets have shown sensitivity to global political and economic events. “Today’s macro and micro factors are affecting the coin values ​​of crypto in the same way as technical equities,” says Zaghari, but he adds, “It is too early to say whether this trend will continue in the future.”

In addition, inflation, rising interest rates and a potential job market correction have prompted some investors to tighten their purse strings. “The temptation to turn your crypto holdings back into fiat can be tempting to some people,” says Zaghari. This scenario, he said, “could increase selling pressure while delaying greater institutional adoption of the cryptocurrency,” leading to a fall in the crypto value.

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