Near Protocol’s NEAR token reached an all-time high Wednesday on signs the up-and-coming blockchain might be undervalued as it attracts more activity.
The token has risen in the current bear market for cryptocurrencies like bitcoin, bucking the trend to increase in price over 18% in the last seven days and doubling over the past month. As of press time the NEAR price was $18.70.
Near Protocol is a layer 1 blockchain that aims to overcome some of the limitations of its competitors such as slow transaction rates, limited throughput and poor cross-compatibility.
Why is the NEAR price going up?
There are a few reasons contributing to NEAR’s recent surge, according to analysts, ranging from some thinking the token has been undervalued to others pointing to new developments on the protocol.
Transaction volumes for NEAR have been on the rise recently, demonstrating increased activity across the network, according to Matthew Dibb, Stack Funds’ chief operating officer and co-founder.
“We’ve seen a resurgence of undervalued [layer 1s] in the last few days with NEAR gaining attention of traders, particularly from a technical point of view,” said Dibb.
Most of the layer 1 focus has primarily been on Solana, Avalanche and Luna and is now shifting, according to Dibb.
“Speculators are now beginning to place bets on other contenders that haven’t had as much engagement in recent months,” Dibb said.
Undervalued layer 1
Juan Pellicer, analyst at IntoTheBlock, attributes NEAR’s recent rally to the fact the protocol has been worked on for over two years with interesting technological innovations behind it. He said the market has treated it as an undervalued project compared with other layer 1s, which are platforms that can support products and services built atop their networks.
“From the infrastructure point of view, it is a blockchain with a working fast-sharded proof-of-stake mechanism,” Pellicer said. “From the application layer point of view, its wallet has accessibility improvements.”
Recently, according to Pellicer, several protocols launched on Near Protocol’s chain and many users like the experience.
“This user positivity is helping the token increase its valuation, which could be argued was previously undervalued compared to other layer 1s such as Solana, Avalanche or Luna,” said Pellicer.
Near Protocol’s development
The Near Protocol has undergone aggressive “building” recently, contributing to its success, according to Denis Vinokourov, head of research at Corinthian Digital.
Vinokourov points to the developer report released by Electric Capital, a Web 3 and blockchain early-stage venture firm, highlighting the aggressive nature of building that is being carried out on the protocol.
“In 2021, NEAR moved up to the sixth-largest ecosystem with 4x+ growth,” said the report. “Polkadot, Solana, NEAR, BSC, Avalanche and Terra are growing faster than Ethereum at the same point in its history.”
Vinokourov said that “this growth, alongside mammoth-sized development funds and the total value locked (TVL), which is significantly below to its peers, is continuing to drive capital into the network.”
So far, there hasn’t been a lot of projects launching on NEAR compared with other layer 1s, according to Vinokourov.
“The excitement and hot money flow that was aplenty when it came to Solana last year might just repeat itself on the Near protocol,” Vinokourov said. “It has room to grow.”
The strong start to the year by the likes of NEAR was seemingly undeterred by the lackluster start by bitcoin. Bitcoin is trading 6.2% down on the month and NEAR is trading 98% up according to data from Messari.
“This shows that market participants are looking for creative ways to generate alpha and also get a broader exposure to the market,” added Vinokourov.
The ‘FOAN trade’
Sean Farrell, head of digital asset strategy at the investment-research firm Fundstrat, expects the outperformance of NEAR and other smart contract platforms to persist. Unlike the larger coins such as bitcoin and ether that have been affected by macro headwinds recently, there are certain pockets of crypto that have performed well, according to Farrell.
“This is due to the amount of crypto-native capital that exists within the system and has no interest in exiting said system,” Farrell said. “Regardless of macro trends, I’d be surprised if this sort of isolated outperformance from certain sectors within crypto doesn’t persist for the foreseeable future.”
It appears there is a new cohort of smart contract platforms including Fantom (FTM), Harmony (ONE), Atom (ATOM) and Near – some quick-thinkers are calling it the “FOAN trade” – that are scooping up a lot of the excess crypto-native liquidity looking for a home, said Farrell.