A rundown of what transpired with BTC, ETH, and the rest in Q3

• Solana outperforming Bitcoin and Ethereum was the major highlight of the last quarter.
• OP and MKR had their highs as there were more to look forward to in Q4.

The third quarter of 2023 (Q3) was full of twists and turns for the crypto market led by Bitcoin [BTC]. At some point, market participants had much to celebrate. Other times, the conviction that the market would either be favorable or maintain a good level of stability dampened.

Read Bitcoin’s [BTC] Price Prediction 2023-2024

Crypto assets decouple from others

Interestingly, 21Shares released an in-depth report of what went down in the sector across all levels. To start with, the largest suite of cryptocurrency Exchange Traded Products (ETPs), mentioned that macroeconomic factors remained in limbo despite the Fed interest hike to 25 basis points (bps).

However, in September, the rate did not increase, leaving open the possibility of an interest hike in the latter months. On a Quarter-on-Quarter (QoQ) basis, Bitcoin decreased by 11.52% while Ethereum [ETH] fell by 13.60%. The S&P 500, which had a strong correlation with BTC and ETH at one point moved in the opposite direction, leading 21Share to conclude that,

“Crypto has been historically negatively correlated with this index, signaling that investors view it as a risky asset class. However, as crypto expands on use cases, we are seeing increasing decorrelation within the asset class itself.”

Solana beats Bitcoin and Ethereum

But there was Solana [SOL], which faced numerous challenges and FUD lately, outperformed both Bitcoin and Ethereum. One of the major reasons for the token’s impressive performance was its partnership with payment platform Visa.

Around September, the credit card giant announced that it had added support for the Solana blockchain for Circle [USDC] transactions. According to Visa, its decision to integrate Solana was because of the blockchain efficiency to process as high as 2,000 Transactions Per Second (TPS).

Consequently, SOL price was the only part of the ecosystem positively affected. According to data shared by 21Shares, Solana’s Total Value Locked (TVL) also recorded a notable increase in the quarter. 

Source: Coingecko and Defi Llama via 21Shares

The TVL measures the unique deposits of assets locked or staked in a protocol. When the TVL increases, it implies a rise in liquidity deposits into dApps under a protocol.

Conversely, a decrease suggests a dearth of liquidity. In Solana’s case, the increase means that market participants were back to trusting the project.

OP and MKR had their times

It also seemed that it was only Solana which registered a 90-day increase in TVL out of the top project. However, two projects that could not be ignored all through the quarter were MakerDAO [MKR] and Optimism [OP].

For Optimism, its native token was able to maintain a 7.43% increase in the last 90 days. This hike could be linked to several developments that happened within the blockchain. For instance, there has been a surge in the adoption of the OP Stack among others.

MKR, on the other hand, could boast a 79% hike in Q3, thanks to the increase in its annualized revenue and interest from Maker’s involvement with Real World Assets (RWAs). Ethereum also made some notable advancements in the quarter especially as it concerns staking and scaling solutions on the blockchain.

Ethereum and Chainlink days

For instance, to combat the centralization of the blockchain, Ethereum leveraged the Distributed Validator Technology (DVT). The DVT allows multiple node operators to run a single validator. This is done to reduce the risk of compromise associated with the validators without affecting the blockchain.

Furthermore, the liquid staking sector continues to dominate the activity on the blockchain. According to the report, liquid staking accounted for 42.8% of all activity with Lido Finance [LDO] leading the cohort.

Source: Dune Analytics

Meanwhile, Ethereum has also delayed its next major upgrade, the Dencun upgrade, till next year. As per scaling on the blockchain, Eclipse, a customizable rollup provider introduced a modular scaling solution. Interestingly, this development brought Solana and Ethereum together.

21Shares noted that,

“In the context of Eclipse, the L2 architecture will use Ethereum for settlement, while leveraging Solana for execution on the back of its parallel processing capabilities for high performance.”

Another project that experienced major development in the quarter was Chainlink [LINK].  But this time, it introduced a study explaining how tokenization of world assets on the blockchain can improve adoption.

Source: IMF

As shown above, Chainlink explained that the Cross Chain Interoperability Protocol (CCIP) could help with the infrastructure for dollar stablecoins noting that,

“The initiative is built around three pillars – educational content to facilitate understanding of the ecosystem, development of best practices and industry recommendations to promote a compliant industry, and actively work toward building on-chain infrastructure that scales to the needs of all stakeholders.”

Q4 could bring more

Going into the fourth quarter (Q4), there seems to be a lot to look forward to. One example is the integration of the Bitcoin Lightning Network on Coinbase. This is to ensure quicker and more effective BTC transactions and cross-border payments.

However, on-chain data from TheBlock showed that the activity with the Bitcoin scaling solution decreased at one point. But its recent resurgence means that market players who trust the Lightning Network have increased and may continue to do so.

Source: The Block

Realistic or not, here’s SOL’s market cap in ETH terms

Another aspect to consider is Solana’s possible revival. It is no news that the blockchain’s reaction to the FTX collapse was very bad. However, with several key developments in Q3, it is possible to see an increase in Solana adoption. With respect to this, 21Shares noted that,

“Solana is seeing a surge in ultra-low-cost NFT minting thanks to a new protocol called Bubblegum which compresses the minting process. For reference, an 86K collection can be airdropped to users for around $100 using Solana, compared to close to $200K on Ethereum.”