Ethereum Leads DeFi Tokens On A 60% Average Fall From Summer Highs
Ethereum is the top dog when it comes to DeFi. Other decentralized finance tokens are built on its blockchain and require ETH gas fees to transact. This also could be why the top-ranked altcoin is held up a lot better than the rest of the DeFi space, which has fallen on average 60% across the board, Ethereum included.
Just how far have these assets fallen from recent Summer highs, and how much deeper could DeFi dive into the end of the year?
DeFi Tokens Dive 60% Or More Across The Board: Has The Mini-Bubble Popped?
Due to the promise of DeFi, it is not surprising how popular it became. What is shocking was how rapidly the trend took off, and how quickly asset valuations soared.
Aave (LEND) for example, remains up well over 3000% year-to-date, even after a drop of 40% from the summer highs. But now that DeFi’s summer of love is over, the breakup is about to get nasty.
On average, most Ethereum-based DeFi tokens have tanked by 60% or more from the recent peak. And in short order, several of these tokens have already lost as much as 90% in some cases.
Related Reading | The Great Ethereum Debate: DeFi Versus ICOs
The collapse of the weakest decentralized finance tokens is reminiscent of the ICO collapse around the time the crypto bubble burst. Some of the projects born from them are still interesting projects today, but most are dead, abandoned, and remain down by 90% or more.
Even Ethereum itself still has long ways to go to revisit former all-time highs compared to even Bitcoin.
Never having experienced a major negative drawdown helped many of these DeFi tokens keep on climbing, but now that is over, could the crypto market collapse due to the DeFi mini-bubble?
$DeFi and $ETH summer cycle high to low. Most highs were made Aug 15-Sept 1. pic.twitter.com/8626bx5ygs
— Ceteris Paribus (@ceterispar1bus) October 4, 2020
Ethereum Holds Strong Compared To Other Tokens, Here’s Why
Ethereum, the protocol that most popular DeFi tokens are built on has held up a lot stronger compared to the rest of the decentralized finance space.
In the chart below, Ethereum’s fall is compared to other DeFi tokens such as Balancer and Yearn.Finance. YFI was one of the biggest success stories of the mini-bubble, sending the asset’s price soaring to four times the price per Bitcoin. Now it is at risk of falling to prices much cheaper.
Ethereum (ETH) Versus Balancer (BAL) Versus Yearn.Finance (YFI) | Source: TradingView
While the DeFi trend was far shorter-lived than the ICO-boom, there’s clearly a resemblance between the two trends. Etheruem was central to both, and while the latter is more sustainable, there’s no denying the crypto sub-category got out of control too quickly.
When speculative assets get overheated too quickly, valuations come tumbling down just as hard, as crypto investors time and time again have learned the hard way.
And unlike the rest of the DeFi tokens that aren’t quite ready for real-world adoption, Ethereum has cemented itself as the backbone of the crypto industry itself.
Related Reading | DeFi Overtakes Ethereum In The Media, Data Shows
Between Etheruem proving once again it can foster innovation in decentralized financial technology and these tokens requiring ETH to move, the second-ranked cryptocurrency is keeping strong.
Hopefully, the drawdown in DeFi is as fast and furious as the ride upward as so the correction can get over with and Bitcoin and Etheruem can get back on track toward new all-time highs.
Featured image from DepositPhotos, Charts from TradingView
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Tony Spilotro, @KhareemSudlow