As the cryptocurrency sector matures, new digital assets are emerging to leverage blockchain technology’s diverse uses. With the industry mostly bullish over the last 12 months, newly created cryptocurrencies have spiked significantly.
Data presented by Crypto Parrot indicates that there were 3,531 new cryptocurrencies added to the Coinmarketcap.com database between March 2020 and March 2021. The number represents a growth of 67.94% from March last year when the figure stood at 5,197.
As of March 2019, the number of cryptocurrencies was 2,106, a growth of 35.17% from 2018’s 1,558. In March 2017, there were 649 digital assets to represent a growth of 1,244.83% over the last five years compared to the current total of 8,728 assets.
Main factors behind the surge in new cryptocurrencies
The significant growth of newly created digital assets in the last 12 months correlated with a period when the cryptocurrency sector was mostly bullish. Across 2020, the traditional market crashed to historical lows but later recovered, with the cryptocurrency sector remaining resilient, led by Bitcoin.
Additionally, the bullish trend was inspired by the entry of institutions into the sector. The investment potentially means that cryptocurrencies are on the path to mainstream adoption. This potential for mass adoption might have inspired the creation of new assets.
At the same time, Bitcoin hit the new all-time highs. The bullish trend meant that cryptocurrencies were gaining traction and therefore held the potential for massive returns; hence new projects entered the ecosystem.
The value gained by assets like Bitcoin over the years is an inspiration for new projects that seek to ride on the wave with the hope of maximum returns. Unfortunately, the emergence of some new cryptocurrencies during a bullish rally has turned out to be scams aiming to profit illegally.
Decentralized Finance (DeFi) boom
Over the last 12 months, the increased adoption of cryptocurrencies ushered in a Decentralized Finance (DeFi) boom. DeFi projects emerged leveraging the blockchain technology geared towards disrupting the traditional finance sector. Typically, a new DeFi project comes with its native currency upon which network transactions are based. The more the DeFi projects, the more assets enter the market.
Notably, the majority of DeFi projects are built on host platforms like Ethereum. The ease of a readily available host makes it more convenient for new tokens to launch since they save resources. Similarly, the rise of Initial Coin Offering in 2017 resulted in the significant growth of new assets as of March 2018.
Crypto forks and the emergence of new assets
Cryptocurrency forks have also potentially contributed to the emergence of new digital assets. Although crypto splitting scenarios were not common over the last 12 months, they contributed to the emergence of new assets in the previous years.
Historically, Bitcoin forks have led to the creation of at least four cryptocurrencies. On the other hand, forked cryptocurrencies are also responsible for new assets. For example, Zcash led to Zclassic (ZCL), and then a twin fork between ZCL and Bitcoin led to Bitcoin Private in 2018.
With new cryptocurrencies launching, the focus is now on their role in advancing the financial world. While some digital assets are created as speculative tools, others focus on mainstream adoption and seek solutions for real-world problems. However, only cryptocurrencies with a strong use case will potentially survive.