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Dream time

Virtually the entire cryptocurrency ecosystem has been washed out over the past week as news of government crackdowns and other negative headlines dominated the discussion.

However, not every coin has fallen. One of the generally positive things about falling cryptocurrency values ​​is that different assets react differently to the sell-off.

Of course, the damage is widespread. Bitcoin is down 12% in the past week and ether, the second most important cryptocurrency, is down 21%. With the exception of stablecoins, which are valued around $ 1 because they are pegged to the dollar, the top 12 coins have all fallen. But others have risen during this time.

Barron searched for coins in the top 100 cryptos by market cap that outperformed over the past week and found several that held up.

Source: coinmarketcap.com

This includes coins that aren’t exactly household names but are being studied as potentially useful technologies: Polygon, Helium, Celsius, and Maker. It is dangerous to assume that the relative winners will hold their own in the longer term – cryptocurrencies can move heavily and suffer from poor liquidity due to trading in opaque unregulated markets. With smaller coins in particular, investors need to understand the platform they are buying into, as they are essentially investing in an early stage venture capital start-up.

Nevertheless, projects that have been sold out are worth seeing. Perhaps one reason why some of these coins performed well was because they dodged some issues affecting the entire crypto network during the sell-off.

“One thing we saw during the panic was that both centralized and many decentralized exchanges were struggling to keep up with demand,” said Matt Hougan, chief investment officer at crypto fund provider Bitwise Asset Management, Barron’s in an email. “Many centralized exchanges simply went out for some time during the sell-off as they became overloaded with traders.”

This may have been the case with Polygon, formerly called Matic, the 14th most valuable cryptocurrency. It is a so-called “Layer 2” technology that is based on the Ethereum blockchain and is intended to make transactions faster and cheaper. Hougan believes Polygon was able to bypass some of the system congestion during the sell-off as more transactions are to be processed. “Because of this approach, their network was not overloaded,” he wrote. “This allowed the users to continue to act without any problems [Polygon] while other approaches faced challenges. “

Polygon is involved in some of the hottest areas of cryptocurrency, including working with trading platforms to make it easier to trade non-fungible tokens or NFTs. Currently trading NFTs can be expensive due to the “gas fees” associated with using trading platforms.

The polygon may also have increased for another reason – it seems better for the environment than some other coins. It uses a “proof of stake” system to validate transactions on the blockchain. Bitcoin uses “Proof of Work,” a system that is much more energy-intensive. Tesla CEO Elon Musk criticized Bitcoin’s impact on climate change, causing some evidence for stake tokens to surpass evidence for work tokens.

Helium is a particularly unusual cryptocurrency that is part of a project to decentralize wireless communication. The goal is to get households and businesses to install small telecommunications hubs on their property – almost like mini cell phone towers – and then reward them with a token called HNT. The company claims to have almost 42,000 hot spots worldwide. It was funded by New York venture capital firm Union Square Ventures.

The Celsius network is known for allowing people to gain interest in their crypto holdings or borrow crypto. Celsius says it has more than 700,000 users and that it is gaining nearly 100,000 users a month. Lending and borrowing are becoming increasingly popular on crypto platforms, and Celsius is becoming a bigger hub for that.

Maker is a token that is part of another unique financial project within cryptocurrencies. MakerDAO is an organization that created a decentralized stablecoin called DAI that can be borrowed without a middleman. Maker is a major hub in the “defi” movement that seeks to shift traditional banking activities to a decentralized network where there are no gatekeepers and where people can lend or borrow currencies more easily. The maker tokens give users a voting stake in creating the market and are likely to increase in value as DAI is used more frequently.

Write to avi.salzman@barrons.com