There is now in excess of $1.3 billion of value locked in Ethereum DeFi but ETH price has yet to trend higher
For months now, decentralized finance has been considered one of the most useful use cases on the Ethereum network. Over the past few weeks, this has culminated in the rapid growth in DeFi protocols. And this also significantly affects the ETH price.
ETH/USD 4 hours chart | Source: Tradingview
ETH price has been hovering just above the lower boundary of the extensive trading range
According to DeFiPulse, there are currently more than $ 1.3 billion of locked value in Ethereum DeFi applications. However, ETH still has not tended to be higher on the back of this positive fundamental trend, causing many to wonder why.
This can be attributed to catalysts, such as:
- Coinbase has begun to list several DeFi tokens
- Investors are seeking non-BTC investments and use cases after the altcoin crash of 2018 – 2019
- Cryptocurrency users are looking to leverage their investments, leading them to DeFi.
There is no signal showing DeFi’s recent superiority as well as Compound’s COMP token, which has been trading 900% higher since Monday of this week. Analysts view COMP’s parabolic performance as a sign of what’s going on and what’s coming to DeFi.
The problem here is that the underlying Ethereum price did not follow DeFi’s parabolic growth. In fact, during the week, ETH was really peaceful, despite being one of the best weeks ever for the vast Ethereum ecosystem.
Why hasn’t ETH increased?
Ryan Sean Adams, a founder of Mythos Capital, opened a public forum through his Bankless newsletter called “Why is haven’t ETH pumping” in response to COMP’s and DeFi’s recent strength. Accordingly, DeFi is simply too small and does not know how to make ETH budge at the moment. DeFi is more complicated than ICOs, and it cannot be just ‘do this and get a ton of money,’ it will take longer. The average Joe doesn’t know what traditional financial instruments are, let alone DeFi.
Meanwhile, it takes millions of dollars to move the price of COMP, but it takes billions of dollars to move Ethereum. This could be the case: ETH’s market capitalization is about $ 25 billion, while COMP’s is about 2%.
Others argue that the technology behind DeFi is too young to cause a real price hike. At least two commentators have identified high Ethereum transaction fees as a potential medium-term obstacle to DeFi adoption, thereby reducing how much demand increases the ETH experience.
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