Why is the growth of Ethereum DeFi not driving the price of ETH up?
Editor's Note: This article comes fromLongHash Blockchain Information (ID: Kyle Torpey)Editor's Note: This article comes from
LongHash Blockchain Information (ID: Kyle Torpey)
LongHash Blockchain Information (ID: Kyle Torpey)
, Author: Kyle Torpey, reprinted with permission by Odaily.
For several years now, decentralized finance (DeFi) has been the biggest buzz on Ethereum. According to data from Defi Pluse, since August 2017, the DeFi market has grown from nothing to $800 million. Since the launch of MakerDAO, there have been six Ethereum DeFi applications each holding at least $10 million worth of cryptocurrency.
DeFi refers to a set of decentralized applications used to replace the services of traditional financial institutions. It can be built on various cryptocurrency networks including Bitcoin, but currently the most associated is Ethereum.
However, the price of ETH did not rise as Ethereum DeFi grasped more and more funds.
On a worse note, data from Coin Metrics shows that ETH is trading lower against BTC than it was in March 2016.
So why isn't ETH's support for DeFi applications driving its own price up?
To delve deeper into the impact (or lack thereof) of DeFi applications on ETH prices, LongHash reached out to Anil Lulla and Yan Liberman of cryptoasset research firm Delphi Digital.
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The DeFi boom pales in comparison to 2017's ICO bubble
Two researchers from Delphi Digital told us that although there are many things to look forward to in DeFi in the future, compared with the level of activity during the ICO bubble period in 2017, this new application of Ethereum is nothing at all.
"It is necessary for us to compare the volume of DeFi and ETH first," said the two of Delphi Digital, "The number of ETH locked in DeFi applications has just exceeded 3 million. Although it has increased by about 1 million compared with the same period last year, it is still only That’s less than 3% of the total ETH supply of 109 million.”
"However, here we also want to remind everyone that this is not a set of exact corresponding comparisons, because the 16 million ETH during the ICO period was not locked at the same time," Delphi Digital added, "However, in terms of the approximately 11.5 million ETH raised in the ICO at the end of 2017 From the perspective of tens of thousands of ETH, only about 29% were transferred to exchanges. We can say with certainty that the overall market bullishness is the main reason for the surge in ETH prices in 2017, but these data also help us quantify the price of ETH demand during the ICO period The reaction also let us understand why the fluctuations brought about by DeFi are still so small.”
Lulla and Liberman also further pointed out that most of the current DeFi is only outstanding among speculators who want to hold ETH for a long time while increasing ETH production capacity.
“Simply put, these DeFi projects are not attracting new capital into ETH as buying pressure,” they said.
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Will the cash out of ETH during the ICO period also affect the price increase?
A previous report by Delphi Digital pointed out that the sale of ETH by the ICO project party has greatly suppressed the price increase. In the February 2019 report, they found that 60% of the tracked ICO-earned ETH had been transferred to exchanges, and the missed OTC transactions were not included here.
