Ether Back to Earth After Traders Lose their Appetite for DeFi Food
One of the big reasons for the bloodshed in the cryptocurrency market is the flow of money out of the decentralized finance (DeFi) sector, which, as a matter of fact, was overdue.
On Wednesday, the total value locked in DeFi hit a record of $9.5 billion, which has fallen to $8.2 billion today, as per DeFi Pulse.
Last month has been an explosive one for the sector, which grew more than 2x and saw a storm of yield farming that resulted in the introduction of projects like YFI, YAM, SUSHI, KIMCHI, TEND, BASED, NOODLES, SHROOM, PIZZA, and many many more.
While some of the DeFi projects are thriving, building an ecosystem, others are just coming and going within a matter of days.
DeFi is in the experimentative stage and being in the midst of a bull market while offering APY in three to five figures have traders and investors salivating for the DeFi food as reflected in the TVL and the prices of these projects’ governance tokens.
But this much irrational exuberance in the market has to have to settle down, and it happened when the tech stocks experienced a sharp reversal.
DeFi projects crashed hard in the past few days; even the top ones like Chainlink, Aave, Compound, YFI, Synthetix, Maker, REN, Kyber, Balancer, BAND, and others weren’t shown mercy.
Need to have en empty stomach when the market crashes. Otherwise, you'll likely puke. pic.twitter.com/Utbj6el7c6
— Alex (@classicmacro) September 4, 2020
Money flowing out of the DeFi and equities market taking a hit pushed bitcoin down to the $10,000 level, and of course, altcoins crashed hard.
This resulted in Ether losing 26% of its value this week after making a two-year high above $480 on Wednesday. The digital asset was actually the one leading the market, given that it is the base on which the DeFi mania is built.
According to data source Sentiment, Ether didn't tank along with the rest of the crypto market due to a global stock market regression but was already primed to regress.
In the light of ETH’s price surge, exchange wallets exploded to a 6-month high to 1.09 million in an attempt to take off the profits and daily active addresses, and network growth also stunted this past week.
However, it might not be over for ETH, yet as the trader, Smart Contractor further looks to short the asset.
One good thing did come out of this, the skyrocketing fees because of the DeFi crazy have finally come down to the ground.
“Food overdose. Traders have lost their appetite. Finally,” noted trader and economist Alex Kruger.
Earlier this week, the gas that went to 299 gwei level for traders has now fallen to just 130 gwei. The average gas price has dipped 55% in these five days, as per Blockchair.