Decentralized finance (DeFi) tokens took it “relatively slow” this past week when compared to Bitcoin (BTC) while crypto and blockchain industry developments strengthened Ethereum’s (ETH) support, according to a report from OKCoin.
The digital asset exchange notes that DeFi tokens are still lagging behind BTC as the pseudonymous cryptocurrency reached all-time highs at around $23,800. While Bitcoin is up 25% in the past week, DeFi assets like AAVE and Yearn.Finance (YFI) are “only” up by around 10%, OKCoin confirmed in its latest report.
During the last week, leading decentralized protocols and DeFi technology platforms announced updates as Ethereum gained a major institutional supporter. Analysts are now expecting these developments to further drive or promote “macro” growth in the DeFi space, even if there’s consolidation in leading DeFi protocols such as Yearn.Finance’s YFI, Compound’s COMP, and Uniswap’s UNI in the near-term, the report noted.
As stated in the report:
“Analysts think this underperformance is a result of the magnitude of BTC’s rally and potential regulations that could affect DeFi. … the fundamentals of the space moved forward this week with notable developments regarding a leading Ethereum scaling solution, Optimism, and new products from top apps.”
The report also mentioned:
“OKCoin launched Earn, a tool that provides easy access to DeFi protocols, with up to 20% APY on stablecoin holdings (offer is subject to certain terms and conditions). CME Group will be launching ethereum futures in February 2021. Goldman Sachs executive Raoul Pal commented that Ethereum could surpass Bitcoin’s market capitalization in the upcoming bull cycle.”
According to industry experts, when BTC “rallies quickly, it can suck the air out of altcoins” (or all coins besides Bitcoin). The report pointed out that this trend was observed during early October and November 2020, where there were some alternative coins that lost value against the USD as Bitcoin surged to $12,000, and then past $14,000 (and beyond). This is also “a phenomenon that has been seen in previous bull markets,” the report from OKCoin confirmed.
Altcoins are now “expected to outperform if Bitcoin enters a period of consolidation,” the report noted. The OKCoin team explained that “the theory goes that once Bitcoin begins to consolidate, investors look to related investments that can outperform.” There are also “some fears that regulation from the US could suppress DeFi,” the report added.
The report pointed out:
“There have been rumors circling regarding potential legislation from the US Treasury that will require virtual asset service providers (VASPs) to report all withdrawals to [self-custodied crypto] wallets. … there’ve [also] been moves made to crack down on the presence of stablecoins in the cryptocurrency market due to fears that these assets are acting as fuel for the shadow economy.”
The report continued:
“There are concerns that these moves may result in further pressure on decentralized finance applications, which require users to have custody of their own funds (often stablecoins) to operate correctly. Prominent fund managers and traders in the space have argued that since DeFi tokens are actually entitlements to cash flows to some extent and carry a governance premium, it can be argued that they should move differently than tokens that don’t provide a cash flow like BTC.”
While sharing other crypto market updates, the report noted that Polkadot, the second-fastest-growing smart contract blockchain platform after Ethereum, will soon “garner the support of SushiSwap” (a decentralized or non-custodial crypto token exchange).
SushiSwap’s co-founder, “0xMaki,” recently revealed that the exchange would soon “open” on Polkadot.
“If you LP’ed past end September you still have 2/3 of your rewards that will be available in 6mo. and you will receive moonSushi when we open on Polkadot.”
According to OKCoin’s report, this seems to be “the first ‘Crypto Twitter’ has heard of SushiSwap’s intention to go cross-chain.” The report added that “there’s a good reason why SushiSwap is pursuing Polkadot, though.” It noted that Electric Capital, a developer-focused venture fund, has released a report “highlighting that Polkadot has a vibrant developer base only second to Ethereum.” The report also mentioned that the network “purportedly has more transactions now than Ethereum did at the same point in its life.”