Bitcoin has caught the eye of Wall Street and mainstream investors over the last month after the bitcoin price surged past its 2017 highs (and could now be poised to climb yet higher).
The bitcoin price has added a staggering 300% over the last year, touching $42,000 per bitcoin earlier this month before falling back slightly.
As investors weigh whether to add bitcoin to their portfolios, smaller new cryptocurrencies that power the emerging decentralized finance (DeFi) market have soared—with some almost doubling over the last week.
DeFi, the idea bitcoin and cryptocurrency technology can be used to recreate traditional financial instruments such as loans and insurance, has exploded over the last year. The total value investors have poured into DeFi projects has risen from under $1 billion this time last year to just over $23 billion today, according to data from DeFi Pulse.
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Ethereum, the world's largest cryptocurrency after bitcoin and the platform that many of the biggest DeFi projects are built, has risen more than 600% over the last year, largely due to booming DeFi interest—with the ethereum price doubling in the last month alone.
An ethereum rival, polkadot, has this week become the world's fourth-largest cryptocurrency by total value, surpassing the embattled XRP token. Polkadot's dot token has risen three-fold over the last month, adding to gains of almost 500% since August.
Polkadot is a proof-of-stake blockchain network, rewarding holders of tokens unlike bitcoin's proof-of-work blockchain that rewards so-called miners. Polkadot claims to fix ethereum's scalability and interoperability issues.
Elsewhere, chainlink, an ethereum-based token that powers a decentralized network designed to connect smart contracts to external data sources, has added over 40% to its value in the last week, taking its total value to $6.4 billion.
Aave and maker, the two largest DeFi projects by value, have climbed 75% and 47% respectively over the last week alone.
The recent rise in bitcoin, cryptocurrency and DeFi asset prices has been put down to fresh government stimulus and retail investors returning to the space three years after bitcoin's huge 2017 boom and subsequent bust.
"While stimulus is on the cards the macro backdrop will remain very positive for risk assets like bitcoin and, going by the recent spike in Google searches, retail investors are also starting to ramp up crypto investment," Seamus Donoghue, a vice president at Swiss digital asset infrastructure startup Metaco, said in emailed comments.
"This means that alt-coins like ethereum, polkadot, cardano, and the Defi tokens will now likely start to outperform. The crypto market cap touching $1 trillion will see new institutional investors start worrying about FOMO (fear of missing out) which will in turn focus the slower moving pension and endowment funds to investigate investment opportunities in this emergent asset class."