NEAR Slides as Altcoins Go Red and Network Fees Plunge

The $1.4 billion market cap coin NEAR dropped 5.3% in the past 24 hours to now trade at $1.49. This comes after NEAR’s price jumped 9.6% on Thursday before recording a drop of 6.87%.

This price action also has the trading volume of NEAR dropping by 21.30% from a day ago to be at $81.6 mln. 

Despite the recent losses, NEAR is up 14.8% in the past 30 days while having lost 64.2% of its value over the past year. Additionally, the coin has risen 20% in value this year so far, as it opened in 2023 at around $1.25. The highest the NEAR price went this year was $2.69 in Feb. 

Launched in April 2020, NEAR’s price set its all-time high (ATH) of $20.44 in January 2022, after the token skyrocketed in 2021 in tandem with the broad crypto bull market. The very next month after hitting a peak, the coin sank to around half that, only for it to make another attempt at its ATH in April 2022 unsuccessfully. 

Ever since then, NEAR’s price has been on a downtrend, having lost 92.70% of its value since ATH. This year, the token remains in the $1-$3 range, about the same as it traded toward the end of 2020. The lowest the NEAR price went to was at $0.526 in Nov. 2022

NEAR is the native token of the highly scalable blockchain by the same name that provides a developer-friendly, decentralized application (dApp) platform. The token that is used to pay network fees and can be staked to enhance network security has a total supply of 1 billion which at the time of its launch was allocated to contributors and early investors as well as community grants and programs.

However, there is no cap on the NEAR supply, and its issuance schedule is inflationary, meaning that the number of NEAR tokens in circulation rises at the rate of 5% a year. Its supply increases when vesting periods from early token sales expire, and those tokens get introduced into public circulation as well as through proof-of-stake (PoS). 

At the same time, the protocol burns the majority (70%) of transaction fees, which means if the number of daily transactions rises significantly, NEAR could become a deflationary token.

Click here to learn all about investing in Near Protocol (NEAR). 

Near Protocol Building the Open Web

Founded in 2018 by Illia Poloshukin and Alexander Skidanov, the NEAR’s main network wasn’t launched until October 2020. So far, the protocol has raised a total of $533.7M in funding over four rounds from 39 investors.

NEAR Protocol is a blockchain-based platform that powers the open web and serves as a development platform. The project operates via a decentralized autonomous organization (DAO), meaning holders of NEAR coins can vote on the platform’s future.

A faster and cheaper Layer 1 than Ethereum, this week, NEAR Foundation, the non-profit behind the development of the protocol, signed up to the Ethereum Climate Platform, showing its commitment to sustainability in Web3 and to working collaboratively with its peers to minimize the environmental impact of Web3 ecosystem development. 

NEAR aims to progress from traditional dApp platforms by overcoming the challenge of a small user base, a limited ability to scale, and security issues. 

To solve the scalability problem, NEAR uses sharding, which minimizes the computational load by separating the network into “shards.” This technique requires each node only to execute code relevant to its shard, allowing them to parallelly compute and enhance network capacity.

At the core of NEAR’s infrastructure is a cloud of community-operated nodes, and smart contracts can be deployed to this cloud. This allows users to use the applications they power without needing permission from a central agency. 

The NEAR platform further uses a unique proof-of-stake mechanism to validate transactions where validators run nodes to stake their tokens. Meanwhile, the platform’s election mechanism is called “threshold proof of stake,” where it conducts an auction of tokens and offers “seats” to validators. Based on the minimum number of tokens they hold from the auction, a given validator may be chosen as a block producer, chunk producer, and hidden validator.

Its consensus protocol, called Nightshade, allows it to operate at about 100,000 transactions per second (TPS) and process a block a second. 

The platform makes use of its native token NEAR to align incentives by enabling customers of cloud resources to pay the service providers and ensure that these players act in good faith. The token is further used to pay transaction and processing fees to the platform for storing data, participate in the staking procedure to run a validating node as part of the network and engage in governance processes to influence network resource allocations and roadmap.

Near Protocol Tweet 2

Just last month, the NEAR Foundation joined the Chinese tech giant Alibaba’s computing and storage arm to accelerate Web3 growth in Asia and the Middle East.

With this partnership, the Foundation gets access to the developer ecosystem of Alibaba Cloud to attract more developers across the region to build on the NEAR protocol, who can launch new validators using Alibaba Cloud’s “plug-and-play” infrastructure. 

Users can also use the NEAR Blockchain Operating System (BOS), a platform launched earlier in the year that allows developers to build into and interact with other users while using Alibaba Cloud’s infrastructure. This development came after Alibaba recently announced the hiring of its new Chairman, Joseph Tsai, an active Web3 investor who has signed multiple deals with crypto-related entities.

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NEAR’s BOS enables visionaries and builders to deliver on the promise of the Open Web by allowing for simple onboarding, top-notch dev tooling, and fully composable apps. The Blockchain Operating System or BOS is compatible not only with other chains and ecosystems but even with Web2. This week, the protocol announced that now Polygon will also be accessible on NEAR’s BOS.

While all this development is going on, platform revenue has been on a constant decline due to the monthly fees dropping 20.75% to $22.30k, and annualized fees are down by 25.4% to $271.33k, as per Token Terminal. The daily fees on the platform are also falling to the early 2023 levels.

While, in comparison, Ethereum’s annualized fees plunged 51.46%, the amount is far ahead of Near at $2.12 bln. Ethereum is actually the top project based on daily cumulative fees, with $1.4 billion earned year-to-date (YTD).

Click here to learn all about buying Near Protocol (NEAR). 

Broader Crypto Market Takes a Hit

This week, Bitcoin has been on a continuous decline. While the largest cryptocurrency ticked higher on Thursday, it is back under $30k ahead of the weekend. Early on Friday, the price fell under $29,600, close to Bitcoin’s one-month low set earlier this week, and as of writing, it is trading at $29,783, down 1.6% in the past 24 hours.

With this, the Fear and Greed Index for the crypto king has fallen into neutral territory, indicating that investors are neither bearish nor bullish, which further suggests BTC might continue to trade in a range in the near future.

Akin to Bitcoin, altcoins are also in the red, with Ether currently exchanging hands at $1,888. This also has the total crypto market cap falling to $1.24 trillion. More importantly, with coins like MKR (11%) and LINK pumping, it’s not good for the crypto market. 

LINK has actually surged about 22% since yesterday after wealthy investors swapped Ether for LINK following the release of the company’s Cross-Chain Interoperability Protocol (CCIP) earlier this week. On-chain data shows some large holders added north of $6 million to their LINK holdings. On Thursday, CCIP, which is being tested by at least 25 partners, became available to all developers across Ethereum Sepolia, Arbitrum Goerli, Optimism Goerli, Avalanche Fuji, and Polygon Mumbai. 

Equity markets, on the other hand, were mixed with the Dow Jones Industrial Average continuing a recent winning streak and the Nasdaq plummeting on soft earnings by streaming service Netflix, as well as Tesla warning of more hits to its already-shrinking profitability and further reducing prices if interest rates continue to rise. 

Meanwhile, initial jobless claims in the US saw a second consecutive weekly decline. For the week ending July 15, jobless claims declined to 228,000, 9,000 lower than the prior week and below expectations for 242,000, reflecting a persistently strong labor market. With this, market expectations for a 0.25% increase in rates on July 26 are now 99.8%, up from 98% a day prior.

$30 Billion in Fresh Demand

Despite the ongoing losses, crypto asset prices are near levels that have been dominating for weeks which means a big swing could be coming on either side. As can be seen with Bitcoin, it has been stuck in the $30k to $31k range for more than five weeks after spiking following multiple spot Bitcoin ETF filings.

These sport Bitcoin ETF proposals have reached the Federal Register, giving the United States Securities and Exchange Commission’s (SEC) a preliminary 45-day window, ending in early August, to arrive at a decision, which can be further extended by the commission up to 240 days, extending until March 2024, for the final acceptance or rejection of ETF applications. The agency may even choose to initiate public consultations to gain further input regarding the product.

While the crypto community anticipates the SEC’s decision on spot Bitcoin ETFs, Greg Cipolaro, the Global Head of Research at Crypto investment firm NYDIG predicted that spot Bitcoin ETFs could attract $30 billion in fresh demand.

For this, he made an analogy between Bitcoin and gold, stating Gold ETFs reportedly hold roughly $210 billion in AUM. However, he noted that a much higher portion (4.9%) of Bitcoin’s supply is held in various funds versus gold (1.6%). This means the ratio is more favorable for the crypto asset when it comes to private investments. However, Bitcoin is far more volatile, about 3.6x, than gold. So, to get as much risk exposure, investors would require less BTC than the yellow metal on a dollar basis, resulting in almost $30 bln of “incremental demand for a bitcoin ETF,” wrote Cipolaro.

In his recent research report, NYDIG’s Cipolaro further noted that if the SEC approves a spot Bitcoin ETF, it could suddenly unlock $10 bln in new demand. According to NYDIG, an estimated $28.8 billion in Bitcoin assets under management already exists globally, out of which $27.6 billion has been allocated to spot-like investment products.

A spot Bitcoin ETF, according to Cipolaro, would be a safer bet for investors, especially because of BlackRock, and act as a reliable investment choice.

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About the Author: Daniel