Last September, the volatility in the price of Ether doubled that of Bitcoin. Although DeFi saw a decline, there was an increase in institutional interest in Bitcoin.
There was a sharp correction in the prices of tokens associated with decentralized finance (DeFi) last month, according to the latest monthly report from cryptocurrency data provider Kaiko. This drop led the volatility of Ether to double that of Bitcoin in September, states the report.
Most of the DeFi tokens that lead the industry experienced negative returns between 20% and 60% in September, according to Kaiko. The study indicates that the correction comes after the record levels of capital flow to DeFi platforms that began in July.
The trading volumes on decentralized exchanges were much higher than in August, despite the correction. For example, Uniswap liquidity pools reached a total locked value milestone of USD 2 billion.
There was a major boost for the Uniswap token after its launch. However, the other major tokens continued to decline, except for yearn.finance.
The growth of DeFi has coincided with an increase in the issuance of stablecoins since the number of deposits of the latter in liquidity pools has increased, notes Kaiko. On September 30th, 3 of the top 5 tokens used on Uniswap were stablecoins. They reached a total locked value (TLV) of more than USD 500 million, equivalent to one-fourth of the total value.
Bitcoin and Ether Recede
Last month, Bitcoin (BTC) and Ether (ETH) showed negative returns of 7.19% and 7.06%, respectively. Trading volumes fell by 18.31% for BTC/USD, and by 8.03% for ETH/USD, the report added.
The volatility of Bitcoin has decreased as a result of the stabilization of its price for more than two months, Kaiko notes. Furthermore, balances of Bitcoin on exchanges fell to levels not seen since November 2018. The report says that “declining BTC balances on exchanges may indicate that investors have decided to hold their assets for the long term.”
Kaiko’s study also highlights an increase in institutional interest in Bitcoin, which was reflected in the increased investment in Bitcoin that MicroStrategy made.
Although the monthly drop in the price of ETH was 7.06%, the initial drop in price was 17%. It fell from USD 388 to a low of USD 320 but then rebounded in the last week of September. The events in the DeFi sector largely influenced those price movements, Kaiko says in the report.
If Bitcoin maintains that short-term trend, investors would turn to other assets that they perceive as safe havens, says Kaiko. However, they also claim that Bitcoin has maintained a negative correlation with the US dollar. That situation poses a “conflicting bullish outlook” if the US dollar continues to weaken.
From the above, it is possible to conclude that Bitcoin is still the best investment alternative for those seeking a store of value. The fact that there is a greater institutional interest in the pioneering cryptocurrency proves this.
By Willmen Blanco
