DeFi tokens are oversold, but gains and TVL point to rebounds for DeFi tokens

Editor's Note: This article comes fromCointelegraph Chinese (ID: CointelegraphChina), Author: JOSEPH YOUNG, reprinted with authorization by Odaily.

Editor's Note: This article comes from

Cointelegraph Chinese (ID: CointelegraphChina)

At the same time, the DeFi space, which is doing surprisingly well as the total value locked in DeFi platforms surged to over $10 billion, is in the midst of a modest correction at the time of writing.

Source: Messari.io

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DeFi index daily, weekly, monthly income chart

Source: Messari.io

When Bitcoin (BTC) and Ethereum (ETH) started to pull back in late September, DeFi tokens plummeted one after the other, Cointelegrah reported. Then, U.S. President Donald Trump unexpectedly tested positive for COVID-19, putting additional pressure on the DeFi market.

Nonetheless, Maker (MKR), Uniswap (UNI), Yearn.finance (YFI), and other decentralized finance (DeFi) tokens have plummeted in value over the past two weeks. However, various data suggest that the fundamentals of the major DeFi token remain strong.

Most notably, Maker, Uniswap, and Aave saw their gains surge 130% to 440% over the past 30 days, and this happened at a time when the prices of their tokens were falling sharply.

Major DeFi tokens may be oversold

Earnings show how much money DeFi projects are getting from their products, which is a good indicator of general user demand and market sentiment.

TVL shows how much capital is locked in a DeFi protocol, generally an indication of investor confidence as well as the project’s market share. TVL also correlates to the liquidity and trading volume of various staking pools.

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Yield Changes vs. Token Price Changes for Major DeFi Networks

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Source: Twitter.com

As the chart above shows, the gains of major DeFi protocols have skyrocketed over the past 30 days. However, the price of DeFi tokens plummeted between 20% and 82%. For example, Maker is down 24% in the past 30 days, but over the same period, its gains have increased by 449%.

Arca chief investment officer Jeff Dorman explained that fundamentals don't necessarily change with price. Dorman cites the change in earnings of DeFi protocols compared to token prices, writing:

Prices and fundamentals don't always move the way you think. DeFi is a great example of this month. According to data from Messari and Token Terminal, this is the 30-day change in earnings for some DeFi protocols, as well as the 30-day change in price.

Not all tokens are created equal. Some generate no economic value no matter how much they earn, while others generate value directly when earnings increase. It's a perfect setup for value investors, the sector is selling off en masse, but there will be winners and losers in the long run.