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Thursday, October 21, 2021

Why Ethereum DeFi Seems Impervious Amid Massive Sell-Off

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With the king bleeding out over the weekend, the crypto market seems to be losing momentum. A few sectors and projects remain in the green zone. Ethereum and its DeFi protocols have made a display of strength and conviction from their investors seem to remain bullish.

Messari Research Mira Christanto compared ETH-DeFi with Binance-DeFi and concluded that the former had a 3.16% loss over the weekend with a staggering $104 billion in total value locked (TVL). In the meantime, BNB-DeFi saw a 35.12% loss across its sector with a total value lock of $20 billion.

In comparison, the ETH-DeFi total value locked dropped from $120 billion to its current level. Binance DeFi stood at $36 billion before the crash, as shown in the chart below.

Ethereum ETH ETHUSD
Source: Messari

May has been a month of progress for many ETH-based projects. Uniswap launched its third iteration on May 5th. Its inventor Hayden Adams reported a $378 million in trading volume for its USDC/ETH pool with $83 million in TVL and a $312 million in trading volume with a $229 million in TVL for its wBTC/ETH pool.

The trading volume has surpassed Uniswap v2 in over 10 days. Christanto expects the protocol to see more action, once users get accustomed and more features introduced:

Volume / Total Value Locked for $UNI V3 is 400-600% that of V2. Most liquidity providers are still just testing the waters. Flood gates might open when they deploy Layer 2 Optimism.

Aave has consolidated important partnerships with Polygon and other protocols. The week before the crash, Aave generated over $9.2 million of interest, $497,000 in Flash Loan Fees, $78,000 from liquidations, a total of $13 million in Aave and Polygon distributions, according to its team member Alex Berto. In one year, Aave has generated over $1.2 billion.

In the same period, this Ethereum-based sector has made impressive growth and seems to have gone from an experiment to a major component of the ecosystem. In the chart below, Christanto shows that the Smart Contract Platform, Decentralized Exchanges, and DeFi were the most resilient with 7%, 4.80%, and 6.77% losses respectively in the 7-day chart.

ETH ETHUSD
Source: Messari

Ethereum With Potential For More Upside

While many are wondering if the cycle has reached a top, others continue to accumulate ETH. While Bitcoin has fallen from its all-time high around $60,000, ETH trades north of $3,300, at the time of writing.

Ethereum ETH ETHUSD
ETH resisting the selloff in the daily chart. Source: ETHUSD Tradingview

Higher timeframes display smaller losses than the rest of the cryptocurrencies in the crypto top 10 by market cap with a 14% loss in the weekly and a 39.8% profit in the monthly chart. ETH investors are showing more conviction, as Christanto also pointed out:

$ETH down -15% from the week without uptick in exchange inflows. Decentralized exchanges also not seeing a meaningful volume uptick. Hodlers are stubbornly bullish.

Ethereum ETH ETHUSD
Source: CryptoQuant via Mira Christanto

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