Despite the bullish trend of bitcoin, DeFi protocols continue their correction path. In recent days, the amount of funds frozen in DeFi protocols decreased by $1 billion.
The analytical team of IntoTheBlock published a study, according to which a turning point could have occurred in the decentralized finance market. According to analysts, the performance of DeFi-protocols changed significantly compared to September 2020. The value of assets locked in the protocols fell by about $1 billion in a few days, but still remains at a record level.
“Value locked in DeFi protocols grew to $11 billion in October from $2 Billion in July and several DeFi tokens appreciated by 5–10x throughout the summer. Since September, though, DeFi token prices and protocol metrics have diverged significantly with tokens retracing by over 50% despite value locked continuing to grow.”
DeFi token prices remain in the red zone. Many of them fell more than 50% from their maximum levels. The report suggests that this may be due to investors’ fear of too high supply inflation and their decision to take profits.
“This is due to natural market forces and profit-taking. By comparing the number of addresses making profits at a certain price level, we can estimate that DeFi token holders have been closing their positions.”
Tokens with high supply inflation, such as Compound, Balancer, MCDEX, Curve and mStable, showed the most powerful fall. Since the beginning of September, they fell in price by more than 60%.
“Overall, this demonstrates that while liquidity mining can fuel supply-side demand, it can also lead tokens to suffer from setbacks akin to depreciation arising from hyperinflation.”