Solana vs. Sui: Which One is Best?

As you will have doubtless noticed, one of the best performers over the last few weeks has been Sui, the layer one that has its roots in Facebook’s ill-fated crypto ambitions. SUI is up over 100% in the last month and further gains look likely if the wider crypto market continues to climb.

For those who have served time in crypto’s trenches, the obvious question becomes: is Sui the Solana of this cycle? It’s a compelling notion and the hype around Sui and its ecosystem would suggest many have bought into it. But, Solana itself has hardly been without hype of its own in recent months.

So, naturally, this calls for a showdown between these two projects. In today’s video we assess Solana and Sui from a fundamental perspective. Who’s behind them, what tech are they using, how much adoption are they seeing and what challenges are they both facing? And of course, how much potential do SOL and SUI have over the coming months?

You can watch that video here.

📈 Crypto Market Forecast 📈 

It’s been a cloudy week for crypto, but the next seven days are looking much clearer. After a few hundred million dollars of long liquidations, the crypto market is ready to keep grinding higher. That’s just because the greed has been flushed out. This can be clearly seen in the growing concerns about whether this bizarre bull market will continue.

Nowhere are these concerns greater than in Ethereum’s ecosystem, where ETH and many blue chips continue to underperform. If you look beneath the surface, however, an epic recovery rally appears to be brewing. According to Ultrasound Money, base fees on Ethereum have been creeping higher in recent days, indicating growing on-chain demand.

Memecoins on Ethereum, such as Neiro, have also experienced significant growth. This would explain the increase in base fees, but it nonetheless underscores the fact that we’re seeing early signs of capital rotating into ETH and adjacent altcoins. Recall that memecoin activity seems to have been the driver of SOL’s unprecedented rally late last year.  

It’s possible that we will see the same unprecedented rally for ETH in the coming weeks, especially now that it’s easy for spot Bitcoin ETF investors to rotate into ETH via the spot Ethereum ETFs. As it so happens, spot Ethereum ETFs experienced minimal outflows, and the trend of outflows has slowed to a trickle. This means there’s only one way to go: up!

In terms of specific narratives, there are early signs that GameFi is starting to pick up steam. For example, Avalanche’s Off The Grid launched the early-access version of its game last week. Some would argue that SUI’s epic rally is also an indication of emerging GameFi interest, given its gaming focus (remember it has a gaming handheld coming out next year).

This is where things get interesting, because GameFi is, in a sense, joined at the hip with NFTs. That’s simply because most GameFi games leverage NFTs in some capacity. Lo and behold, older NFT collections are starting to rally, and newer NFT collections are starting to recover. This trend could accelerate if and when GameFi becomes front and centre.

In turn, the growth in NFTs will result in growth for adjacent crypto niches, namely DeFi. As a matter of fact, many crypto projects such as Toncoin have explicitly stated that they intend to use GameFi as a sort of Trojan horse to get people into DeFi. Not only that, but the goal of growing DeFi is to increase on-chain liquidity enough to support other use cases.

Logically, most other use cases, and particularly payments, are likely to leverage stablecoins to some degree. This makes the recent launch of Stripe’s USDC payments that much more significant. Consider that Stripe is one of the largest payment processors alongside PayPal, which some of you will know has its own, payments-focused stablecoin, PYUSD.

But let’s not get ahead of ourselves; this rotation between cryptos and narratives will take weeks, possibly months to play out. Over the next seven days, crypto is likely to continue a cautious grind higher due to the fundamentally bullish backdrop - rising liquidity, falling interest rates, bearish sentiment: all the stuff that expert crypto traders know to be bullish.

When in doubt, zoom out!

🐴 The Four Horsemen of Crypto 🐴

This cycle, in many ways, feels vastly different from the ones before it.

Previous cycles were predominantly driven by the search for innovation and yield - the 2016 cycle was driven by the popularity of smart contract blockchains and the 2020 cycle was driven by the popularity of functional yield production via on-chain protocols (DeFi). VC involvement in crypto projects was seen as a positive marker for ‘real value’ and major CEX listings were bullish events.

By comparison, in this cycle, price action has been driven mostly by narratives; memecoins outperforming major altcoins; venture capital funding being seen as a red flag; and major CEX listings as market-top markers.

So, how did we get here?

It’s a confluence of many factors, but most of them can be grouped under the heads of four major trends. Or, as we like to call them – The Four Horsemen of Crypto.

The first horseman was the ‘low float, high FDV’ trend. This is the primary reason why the price of every new token launched this cycle has been going down only. Specifically, it refers to a growing trend of new projects almost exclusively being launched with high valuations (FDV) and a low initial circulating supply (float). It’s a topic we covered in detail in a previous issue of this newsletter.

The TLDR of this problem is that a high FDV places a ceiling on the price growth for an asset, relative to the overall crypto market cap in the long term. When you couple this with an aggressive token unlock schedule, this results in down-only price action for the token. For post-launch ‘market’ buyers, this means there is very little sustainable upside.

A variety of factors have been blamed as the cause of this phenomenon, including an influx of private market capital, aggressive valuations, and market pressure to list on Tier 1 centralised exchanges like Binance.

The chief of these factors appears to be the private market. As UpOnly podcast host Cobie explained in his Substack article, the crypto industry’s broader acceptance has resulted in increased attention from VCs, allowing project teams to raise funding at substantially higher valuations compared to a few years ago. This substantial spike in demand from VCs has also resulted in a burgeoning private market for locked tokens.

As the private market valuations increase, so too does the pressure on sophisticated private market participants and the team to ensure these inflated valuations are maintained post token launch. One of the easier ways to manipulate valuations post launch is to have a low initial token float. Retail investors who were oblivious to this dynamic were fooled into being exit liquidity for VCs. Eventually, the market wised up, but this only amplified the effects of the second horseman.

This second horseman is what we like to describe as the ‘Ponzi Singularity.’ It’s the primary reason why memes have outperformed major altcoins this cycle. It’s also why ‘narrative’ has been the primary way to identify which cryptos would pump at any given time.

The Ponzi Singularity trend refers to a market state where the promise of profit is the only thing that matters. Fundamental demand drivers and technological use cases play second fiddle to attention and greed.

Retail market participants would rather take a chance on making life-changing wealth via memecoins than buy altcoins whose profit potentials and valuation ceilings are ultimately defined by the ability of teams to execute roadmaps and deliver real value. As analyst Defi Squared notes in his recent thread, a primary reason for the popularity of memecoins is that their ‘theoretical valuations’ are limitless.

As noted before, this mindset has only increased in popularity after the recent backlash against low float, high FDV token launches. The underperformance of tech-superior coins from previous cycles, including ETH, has also done nothing to improve this sentiment. That said, the money-chasing mindset isn’t new in crypto. The only difference is that in previous cycles the teams peddling these dreams were forced to create Ponzi-like projects with complicated tokenomics (Terra) to grab this attention. Innovation was still the norm; this time all you need is a meme or anything that is the subject of attention - AI being a prime example.

This brings us to our third horseman, ‘Crypto Burnout.’ The ‘speculation first, technology second’ nature of the industry has begun to take a toll on some of the sharpest minds in the space. As ‘price-go-up’ becomes the dominant measure of a project’s success, crypto builders often find themselves stuck in a dark place being forced to focus more on marketing and narratives rather than innovating on the project’s core technological use case.

If they’ve raised funding from VCs, they’re coerced by them to launch a token to extract as much value as possible from retail investors. The ROI timeline for VCs in web3 is significantly shorter than what is expected of companies in the traditional web2 industry. This approach causes many founders to quit the industry or succumb to paths that offer the least resistance to value extraction. In other words, more project founders are working on speculative cash grabs than real-value projects.

This brings us to our final horseman, ‘CEX Greed’. This is the reason why centralised exchange (CEX) listings for altcoins have become a local top signal instead of a bullish catalyst.

In previous cycles, there was a good amount of healthy competition for the top spot among centralised crypto exchange service providers. However, following the fall of FTX, there has been increased scepticism towards using centralised exchange service providers, especially new ones. The ones that have remained after FTX’s fall, such as Binance, have suddenly found themselves with more favour in the industry.

The lack of competition has allowed a few of the top CEXs to dictate and charge exorbitant fees for services. As Arthur Hayes notes in his recent article, there are three main ways CEXs extract money from projects. They can charge an outright listing fee; require a deposit (that is returned if the project delists); and mandate a specific amount of on-platform, project-financed marketing spend.

Taking the example of Binance, Hayes notes that the exchange charges up to 8% of the total token supply as a listing fee. It then requires projects to purchase BNB worth $5,000,000 and stake it as a deposit. It also requires projects to give away 8% of their token supply to Binance users via on-platform airdrops and other campaigns such as the Binance Launchpool. In summary, a Binance listing could cost projects almost 16% of their token supply and a $5 million purchase of BNB. If Binance isn’t the primary exchange, a project will still face spending of almost $2 million worth of tokens or stablecoins.

The obvious problem here is that a high CEX listing fee tightens the amount of resources project founders have to spend towards developing their product. CEXs are also motivated to list high FDV, low float projects since the latter have plenty of unallocated tokens to hand over. Combine this with the fact that the high FDV, low float meta has resulted in poor post-launch token performances and you have a recipe for disappointment.

All four horsemen have created this negative flywheel that seems to push the industry further into a state of perpetual distrust and chaos. While it’s clear that the current state of affairs needs to change, it’s hard to say just yet where or when this change will start to materialise.

🚀 NEW Coin Bureau Trading Host Launches First Vid! 🚀

Coin Bureau’s Trading Team has been working hard to bring you insightful crypto trading content to succeed in our mission to become the number one crypto trading channel on YouTube!

Our second host ‘The Trading Parrot’ has stepped up and released his first trading video: “No All Time High - What’s Really Missing?”. We are massive fans of his deep and comprehensive market analysis and we think you will be too! So, give that a watch and drop him your feedback in the comments.

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🔮 Video Pipeline 🔮

* Eigenlayer Review: What’s it all about?
* Quantum Computing: Future impacts on us all…
* Liquidity Report: What can be learnt from this barometer?
* Elliptic Regulations Report: This You NEED To Know!
 
🏆 What's New at CoinBureau.com This Week? 🏆

* What are Appchains and How Do They Work?
* 6 Best Bitcoin Mining Pools of 2024: A Comprehensive Guide
* Sei Network Review 2024: The Dual Application Layer Network
* Core Wallet Review: Exploring Multi-Chain And DeFi Features

📖 Quote of the Week 📖

Overactivity is the enemy of long-term returns. Sometimes, if you don’t have a reason to trade, don’t.

“Time is your friend, impulse is your enemy” - John Bogle

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.