Ethereum and DeFi: How long will the trend continue?
After we reported yesterday on the strengthening of the trend around decentralized finance (DeFi) and yield farming, we want to go into the topic again today. We ask ourselves how long the trend will continue? - We are looking at the performance of some Ethereum-based tokens and whether they actually outperformed the market or Bitcoin.
Trendy DeFi: Ethereum token with strong performance
Without a doubt, the last few days have been full of reports on compound and balancer. The two DeFi tokens saw strong growth and underline the trend enabled by Ethereum.
To quantify the extent, let's take a look at analyst Tahar Zafar's table. In a tweet published 8 days ago , this clearly showed how massive the outperformance of some DeFi tokens actually was. For example, tokens based on Ethereum such as Bancor (BNT) or Aave (LEND) have seen exceptionally high growth in the past 90 days.
It quickly becomes clear that neither Bitcoin nor Ethereum could even keep up with the performance shown above. After such a rapid and steep phase of growth, the question naturally arises as to how long such a trend can continue?
Long phase of hype for decentralized finance
Even though the topic of decentralized finance has become more and more important in the past few days and weeks, the phase of hypes has been going on for some time. In addition to the strong price performance, which we have shown in the table above, there are other factors.
On the defipulse.com website , for example, you can see that the total value in USD has also increased massively in DeFi applications. In other words, the train of tokens based on Ethereum has been rolling for a long time and now seems to be getting faster and faster.
In my opinion, the tweet from Weiss Crypto Ratings hits the current sentiment very well:
The tweet above says that the topic of Ethereum and Decentralized Finance is extremely exciting, but the idea that a complete decoupling from the market results from this is again absurd. Euphoria is mostly short-term and the performance of many DeFi tokens will soon be in line with the market.
Even if a short-term cooling of the situation is conceivable, the long-term trend is another matter. In particular, the switch to Ethereum 2.0 and the associated positive effects on dApps (lower fees and better scalability) could give DeFi a further boost. I therefore conclude that decentralized finance will definitely be an exciting topic for the future. Corrections are realistic in the short term and the performance of some tokens is likely to approach market performance again. In the long term, some projects may emerge as “hidden champions” and stir up the market.
