According to data from Santiment, the daily trading volume on DeFi has also decreased by 30.2%. In recent days, the Curve token has lost 92.7% on its value, followed by SushiSwap and bZx.

The decentralized finance (DeFi) market is in the red and the industry’s top tokens have reported losses of up to double digits in just a week. The fall has affected assets such as COMP, YFI, and SUSHI, whose prices recorded a reduction of more than 50%.

Blockchain analysis firm Santiment reported that the capitalization of the DeFi industry market dropped by 25.1% in less than 24 hours. However, cryptocurrency market analyst Ceteris Paribus estimates that the total devaluation of the market in recent days is around 61.8%.

The Santiment report highlights that the daily trading volume has decreased by 30.2%. The fall has affected the favorite tokens on the market the most, as is the case of COMP of the Compound platform, which recently lost over 55% on its price. Concerning Andre Cronje’s Yearn Finance, the YFI token recorded a 31.3% decline in just 23 hours.

However, this collapse has had the worst consequences for the Curve, SushiSwap, and bZx. According to data from Ceteris Paribus, the value of the Curve token decreased by 92.7%. SushiSwap and bZx followed with depreciation of 91.5% and 90.4%, respectively. The drop also hit Uniswap, one of the most popular platforms in the DeFi ecosystem, whose token lost 38.2% on its price.

There has been a stir in the community due to the drop since it has reportedly reduced one-fourth of the capitalization of the DeFi market in less than a month. After the popularity of decentralized finance, platforms exploded and yield farming practices took hold some weeks ago, DeFi tokens were amid a bullish rally. However, this significant drop in prices has led to speculation on social media about whether DeFi has burst like any financial bubble.

End of DeFi or Bump in the Way

Economist Kruger Macro compared the current decline in the DeFi market to that of Initial Coin Offerings (ICOs) occurring two years ago. At the time, the market capitalization of ICOs decreased by 95%, over the course of a year. Today, the collective market for DeFi tokens has lost the same percentage of capitalization, in just a single month.

This behavior may not paint a good picture for DeFi, but it does not mean that the industry will die completely. The Santiment report noted that many DeFi tokens are currently undervalued, so their price could increase in just a few hours or weeks. It also denounced that there are whales in the market, that is, holders with large sums of tokens mobilizing huge amounts of money.

Users believe that the increase in gas fees on Ethereum has led to the collapse. At the time of writing this article, the gas fee is at 154 gwei, an average of USD 0.80 per transaction. However, users report that they are paying up to USD 30 per fee to conduct complex operations or those with large amounts.

The increase in gas on Ethereum affects the good use of DeFi platforms, but the popularity of this industry has exploded in recent months. When this happens in a new market, it is impossible to avoid the artificial inflation of the prices of its products. Therefore, an abrupt correction of the values in the DeFi market may have caused this drop.

By Alexander Salazar

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