With DeFi gaining strength once again at $ 953 million, ETH price bullish case is being strengthened
According to an analysis from LongHash, Ethereum’s decentralized financial ecosystem (DeFi) has been struck after the crash on Black Thursday. Specifically, MakerDAO becomes unstable when users no longer trust the protocol. Besides, another potential weakness comes as Ethereum’s options see rocketing volume, signaling that ETH price is likely to see heightened volatility.
DeFi market began to recover
Besides MakerDAO, a fledgling DeFi protocol with more than $ 25 million in crypto assets was hacked due to a glitch in a smart contract. After this mess, many people thought that the entire DeFi ecosystem was almost dead. But, as we all know, this death did not happen. This is a good signal for the case of Ethereum bull.
Ethereum investor Parafi Capital stated:
“We believe this lack of stability and liquidity is translating into uncertainty around using DAI as a decentralized stablecoin in many DeFi protocols. Anecdotally, we have heard a handful of DeFi teams express frustration over DAI’s lack of liquidity/stability.”
Following the March crypto incident, the value locked in DeFi applications has dropped to $ 500 million from more than a billion. But according to data shared by DeFi Pulse, decentralized finance has recovered.
The report stated:
“There is now $ 953 million worth of assorted crypto assets locked into DeFi applications, according to the site. This is up nearly 100% from the March lows. Notably, not 100% of the $ 953 million in DeFi assets is based on Ethereum, but a majority is.”
In particular, Maker, Synthetix, and Compound are the holders of assets worth about $ 750 million.
Data of value locked in decentralized finance (mostly Ethereum) | Source: @AlexanderFisher
But, is this a good sign for Ethereum?
With DeFi gaining strength again, it seems that people are still bullish ETH.
MakerDAO Founder, Rune Christensen, stated:
“4 million Dai was just minted with WBTC in a single transaction. This showcases the latent demand for non-ETH assets, and thus the beginning of a broader trend of DeFi acting as an economic vacuum that will eventually attract almost all value to the Ethereum blockchain.”
This shows that DeFi will attract all value in the cryptocurrency space. And that is also the view of Ryan Selkis, the chief executive of crypto research firm Messari.
He explained the following:
“Due to the introduction of DeFi and the market share, it could capture ETH has a higher ceiling to rally towards than 2017 / 2018’s rally. For reference, the 2017/2018 rally brought ETH to $ 1,400.”
Rocketing options volume is one of the factors could influence ETH price action
According to data from Skew, ETH options volume rose by $20 million on Deribit yesterday.
New record for ether options volume on Deribit: $20mln notional traded yesterday pic.twitter.com/w6oSMuT8wO
— skew (@skewdotcom) May 31, 2020
At press time, the ETH price is falling by nearly 5%, with the current price of $ 231.
Accordingly, cryptocurrency analyst Luke Martin said:
$ETH this time was not different…
Up 15%+ after breakout & retest. pic.twitter.com/MNaw6mYwGj
— Luke Martin (@VentureCoinist) May 30, 2020
Looking at the chart, we can see the incredible similarities between this uptrend and the trend seen in February and April. If Ethereum copies previous price action, it could see sideways trading before falling.
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