3 Reasons Why DeFi Tokens Are Outperforming Bitcoin Prices
Editor's Note: This article comes fromCointelegraph Chinese (ID: CointelegraphChina), Author: ANTÓNIO MADEIRA, reprinted with authorization by Odaily.
Editor's Note: This article comes from
Cointelegraph Chinese (ID: CointelegraphChina)
, Author: ANTÓNIO MADEIRA, reprinted with authorization by Odaily.
Decentralized finance (DeFi) is a fast-growing sector in the crypto industry, and while the DeFi ecosystem has yet to surpass the general cryptocurrency market in size, new ways to borrow and save have garnered positive media coverage and “praise.”
According to a report provided to clients of Delphi Digital, tokens of popular applications in the DeFi space are showing huge gains, both in the long and short term. For example, London-based DeFi lending platform Aave has far outperformed Bitcoin in the last week, gaining 66.46%. MakerDAO, another popular DeFi-based token, also gained 25.60% last week.
image description
DeFi Token Performance Source: Delphi Digital
Decentralized exchange (DEX) tokens like Kyber, Loopring, and Bancor also saw double-digit price increases. Although the general growth in the DeFi space has been accompanied by meager volumes compared to Bitcoin (BTC) daily volumes, it begs the question, what is causing the prices of these assets to rise so significantly?
secondary title
Ethereum 2.0 is coming
Just like Bitcoin, the Ethereum network has been dealing with some scalability issues that could affect the growth of DeFi to a large extent as most of the activity takes place on the Ethereum blockchain.
The upgrade is expected to take place sometime this summer, and as DappRadar director of communications Jon Jordan explained, it will have a huge impact on the entire Ethereum ecosystem, including the DeFi space. Jordan told Cointelegraph:
“The two main obstacles to making Dapps on Ethereum easy to understand and use are gas fees and slow block times. Ethereum 2.0 will fundamentally solve these problems and make Ethereum Dapps more like using the ones we are all used to Standard web and mobile apps."
Ethereum 2.0 will bring sharding and staking solutions designed to solve many of the network's current and future problems that will not be fully implemented until 2021 or later, as Phase 2 of the upgrade must be released.
secondary title
Online activity is at an all-time high
As reported by Cointelegraph, interactions with the Ethereum network via simple transactions or smart contracts have recently reached new all-time highs. According to Delphi Digital, total Gas usage on the Ethereum network has been on the rise since the start of 2020.
image description
DEX tokens outperform centralized tokens five times. Source: Messari
While gas usage is at an all-time high, transaction volume is not. This shows that, in terms of actual usage, DeFi and other Dapps are gaining popularity on the Ethereum network. An increase in the use cases of DeFi networks could explain why the prices of these tokens have risen.
secondary title
More projects and users is a bullish signal
However, DeFi tokens are also becoming an increasingly popular investment vehicle, allowing for high yields through lending and increasing value by locking into lending apps.
image description
According to Evgeny Yurtaev, founder of DeFi project Zerion, DeFi seems to be growing exponentially. Yurtaev recently shared a graph on Twitter showing the number of new assets nearly doubling in the last month, surpassing 1,000 for the first time ever.
New DeFi assets per monthDune Analytics
According to Dune Analytics, not only has the overall activity and number of projects increased, but the number of DeFi users has reached an all-time high of nearly 600,000.
image description
Number of Ethereum DeFi users over time Source:
secondary title
The future of DeFi looks promising
While the growth in adoption bodes well for Dapps and Ethereum in general, it also shows some pressing issues in Ethereum, especially around congestion and scalability. The increase in price could be seen as a bet on Ethereum 2.0 and its ability to solve these problems in the next few years.
