Here's Why Waves (WAVES) Gained almost 240% in March

This lesser-known cryptocurrency is making waves.

Fledgling smart contract cryptocurrency Waves (WAVES) gained about 240% in March and is up about 275% since the start of the year, according to data from CoinGecko. Available from several top cryptocurrency exchanges, Waves is one of the few big cryptocurrencies to increase its price since the start of the year. The price jump pushed it into the top 50 cryptos by market cap.

Waves is similar to Ethereum (ETH) or Solana (SOL) in that it's a platform for decentralized applications. According to its website, one of the key benefits of the blockchain is the simplicity of issuing tokens. It says, "Issuing your own token on the Waves blockchain is a piece of cake."

So what's behind the surge in price? Strangely, there's no clear answer. But here are a couple of potential drivers:

1. Waves 2.0 and 2022 roadmap

In February, Waves began its migration to Waves 2.0, a new iteration of the blockchain. The upgrade will speed up transactions and also make it Ethereum Virtual Machine (EVM) compatible. This aids interoperability with the Ethereum network. At the same time, it set out some ambitious goals for the year ahead, including a metaverse protocol with integrated blockchain games. It also wants to introduce support for Ledger hardware crypto wallets, improved smart contracts, and release an open source version of its platform. These moves are interesting, but it was only in late February that Wave's price started to soar.

2. Creation of Wave Labs and $150 million fund

An international expansion plan was one part of Waves' roadmap, and it's already making progress. On March 31, it launched in the U.S. and announced both its leadership team and plan to set up a headquarters in Miami. It also plans to launch a $150 million incubation fund as well as a separate decentralized finance (DeFi) fund. The incubation fund aims to encourage the move from Web 2 to Web 3. It's due to be launched in April or May.

3. Increase in popularity of Neutrino's stablecoin

One factor to look at when evaluating a smart contract crypto is its total locked value (TLV). This is the total amount of money that's invested with applications in its ecosystem. According to DeFi Llama, Waves moved into 8th place in terms of TLV with an increase of almost 170% in the past 30 days.

The main reason for this is that investors are starting to use Neutrino's stablecoin, USDN. ​Neutrino is an algorithmic stablecoin protocol that works similarly to Terra's LUNA. Stablecoins peg their value to another asset, such as the U.S. dollar, and algorithmic stablecoins use set algorithms to maintain the peg rather than having a cash reserve.

4. Confusion around Waves' connection to Russia and Ukraine

Waves was once dubbed the "Russian Ethereum" because of connections to Rostec, a Russian manufacturing giant. When various countries announced strict sanctions on Russia after it invaded Ukraine, it seems that some crypto traders may have mistakenly speculated that Waves might offer a way for Russians to evade sanctions.

The project's founder, Alexandr Ivanov, rejects this idea. He told Bloomberg that he is actually Ukrainian and has dual citizenship. He said there was no connection between Waves' price rise and the conflict. Ivanov also stressed that Waves had cut all ties with Russia.

What it means for investors

Buying any cryptocurrency after such a huge price gain can be risky. It's hard to know how much the price increase has been driven by real value and how much is the result of hype or speculation. All cryptocurrencies carry risk, but there's more risk after a big price gain in a short space of time, especially if we can't easily pinpoint the cause of that gain.

However, Waves does have a lot going for it and the $150 million fund could fuel the development of interesting projects on its platform. As we saw last year, the prices of those smart contract platforms that took market share from market leader Ethereum posted significant gains. To give some context, Waves has gained around 780% since the start of 2021, where Solana has gained almost 8,000% in the same period.

It makes sense to evaluate Waves in the context of other programmable cryptocurrency platforms. This is an important sector as a whole. These ecosystems are where many crypto ecosystems get built, making them a cornerstone of the cryptocurrency industry. The challenge is that it's also a very crowded space and Waves is just one of many cryptos competing for dominance. Waves has demonstrated in recent months that it has potential, but it might be wise to wait and see whether it can sustain its dramatic gains.