In summary
- Toncoin’s price fell below $5 on Tuesday, hitting a four-month low following the arrest of Telegram founder and CEO Paul Durov in France.
- The Telegram-linked Cryptocurrency that powers The Open Network (TON) fell 4.1% to $4.95, showing a 26% loss over the past two weeks.
- Durov’s arrest and a recent network outage have exacerbated price declines as TON shows signs of struggling to grow beyond Telegram use cases.
Toncoin’s price fell below $5 on Tuesday, hitting a four-month low following the arrest of Telegram founder and CEO Paul Durov in France late last month.
The cryptocurrency linked to Telegram, which powers The Open Network (TON), is officially separate from the messaging app. Still, TON has ties to Telegram’s CEO and serves as the backbone for Telegram’s crypto features, such as the digital wallets used within the app.
Over the past day, Toncoin’s price had fallen 4.1% to $4.95, showing a 26% loss over the past two weeks. With a market cap of $12.4 billion, Tuesday’s drop was enough to knock Toncoin out of the top ten of cryptocurrencies ranked by market cap, according to CoinGecko.
While Toncoin’s integration with Telegram produced an initial surge in users, Durov’s arrest and a recent network outage have exacerbated price declines as TON shows signs of struggling to grow beyond Telegram’s use cases, said David Kinitsky, COO of Dominant Strategies, a Blockchain development firm.
“You couldn’t ask for two worse events to happen back-to-back,” Kinitsky told Decrypt in an interview, adding that the events amplified questions about TON’s resilience and growth.
Durov was arrested on charges related to Telegram’s lack of moderation. French authorities said he failed to do anything to stop the spread of illegal activities on the platform, including drugs and money laundering. Following his indictment on six charges, Durov was released on bail last week.
While the price of Toncoin has surged 166% over the past year, most holders are in the red, according to data from IntoTheBlock. Around 70% of addresses holding TON bought the cryptocurrency above its current price, while 10% are in paper profits.
Telegram began rolling out TON-based wallets to users last September. And almost a year later, tap-to-earn games are driving a speculative wave of engagement. It all started with Notcoin, followed by games like Hamster Kombat and X Empire.
In July, Durov publicly celebrated when Telegram hit 950 million users. But depending on how Durov’s criminal case plays out, access to Telegram could be disrupted in certain regions, preventing that lucrative integration from attracting new Toncoin users, Kinitsky said.
“It’s a double-edged sword,” he said. “Once they reached saturation on Telegram, the question became where to go next, and also how to foster a developer community.”
Telegram has its own app store with over 1,100 different apps. While many apps support Toncoin as a currency, the network has a smaller number of DeFi protocols.
So far, 23 DeFi protocols have been launched on Toncoin, according to DeFillama. Of these, the majority are focused on liquid staking, with a couple of decentralized exchanges accounting for the majority of assets deposited or staked in Toncoin smart contracts.
Since mid-July, the total value locked in assets on Toncoin has fallen to $333 million from $776 million. As Toncoin’s ability to grow has come under increased scrutiny, that has left little in terms of an ecosystem of applications on which the project’s merits can rest, Kinitsky said.
Meanwhile, the network has endured several outages. Last week, the launch of a dog-themed meme cryptocurrency on the TON network paralyzed the network for over three hours. Previously, network outages were a thorn in Solana’s side.
TON was originally conceived as the Telegram Open Network by Durov and his brother Nikolai. But the company backed away from the project as it neared completion in 2020 after the Securities and Exchange Commission (SEC) raised concerns about an associated token.
The project was later taken up by a group of community developers, who launched it as The Open Network in 2022. Ultimately, Kinitsky said TON’s prospects would be bolstered by an increased focus on technical solutions that make it easier for developers to build protocols.
“I haven’t seen that much infrastructure, middleware and tool development around the TON ecosystem,” he said. “You have a very easy deployment and implementation, but if you can’t take the next step or go further (…) what’s going to happen here?”
Edited by Ryan Ozawa.
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