DeFi is the sector to watch: probably more when the sector’s tokens are bearish rather than bullish. DeFi has not been at its best in recent weeks, however. Severe form of COVID-19 or normal “flu”?
Is DeFi over already?
According to the latest statistics from CoinMetrics, the euphoria around DeFi gradually faded over the month of September 2020, causing the prices of many of its most iconic tokens to fall.
In recent months, DeFi protocols such as Yearn.Finance (YFI), Compound (COMP), Synthetix (SNX) and Chainlink (LINK), recorded increases in the price of their token, increases of up to + 500%.
The trend reversed with 72% of the top 250 cryptocurrencies posting a weekly drop in price.
On a monthly basis, this proportion reaches 93%. Messari indicates that the correction rate is between 15% and 85%: the protocol Curve lost 78% of its value while bZx recorded a drop of almost 85%.
Synthetix and Aave (LEND) are the 2 protocols that get away with the least damage, with -34% and -29% respectively.
Declines are part of the program
While traders wonder if these drops will continue, it should be remembered that reversals are common in the crypto markets.
Bitcoin (BTC) had landed at $ 1,180 in 2017 but, it also hit an ATH of $ 20,000. In his newsletter for the week of September 28, 2020, DeFiWorld reminds us that these adjustment phases are normal.
Corrections of this type are part of a larger cycle lasting generally 4 years, punctuated by financial bubbles.
Observers should focus on long-term trajectories and not focus on short-term fluctuations of the month or week.
DeFiWorld indicates that this year 2020 is similar to 2016 and, that the market trend is clearly upward.
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.
Roller coasters should be the favorite attraction for cryptophiles. It goes up and it goes down and, you have to have a strong stomach and a full wallet. DeFi worries because of its strong growth in such a short time; a short-term decline raises fears of an explosion of the bubble – if DeFi is really a bubble. Keeping a cool head: quite a challenge in today’s DeFi.
Litecoin, welcome in the Silver Age