Ethereum: How much of a difference will DeFis absence make?

Tuesday 27 October 2020, 7:02 AM AEST - 1 month ago

On 20 July, Ethereum was gearing up for a pivotal rally, one that was least expected by the rest of the community. Between 21 July and 1 September, Ethereum would register a whopping surge, one that would see it climb to $489 from $235, while also recording its 2-year high. While the bullish rally was memorable, the bearish pullback was pretty stunning as well, with Ethereum dropping to $309 on 5 September.

While Ethereum was above the $400-level yet again at press time, the key difference between July 2020 and the present rally remains the crypto-phenomenon of the year – DeFi.

How important was DeFi in July 2020?

DeFis interest was widespread and its impact was significant on Ethereums network. From high transaction fees to miners becoming more profitable, DeFi was bringing in a serious level of attention to Ethereum, and it possibly played a huge role during Ethers price pump to $489.

However, the excitement was very short-lived. Bad DeFi tokens drowned the euphoric nature of these applications, and with Ethereums price plummeting on the charts, the hype was beginning to fade away.

YFI token, which was worth close to $43,000 at one point, had fallen dramatically and traded at around $13,900. Now, with another rally beckoning Ethereums price, market indicators seem pretty split down the middle.

According to Santiments latest analysis, Ethereum miners have remained resilient to turbulent market movements, holding their position. Additionally, an increase in new active ETH addresses was also noted.

However, Daily Active Deposits (no. of unique deposits on Ethereum) has spiked a lot, a development that may lead to a selling outrage, eventually collapsing Ethereums rally.

Further, as illustrated by the attached chart, the ETH-BTC 1-month realized volatility spread registered a sharp drop, indicating that Bitcoins price was more open to swings, when trading relative to Ethereum.

Can DeFis absence for Ethereum be tackled?

The long-term answer is Yes.

While DeFi had its allure for traders to incorporate ...

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