Decentralized finance coins based on Ethereum have undergone strong rejections over recent weeks. Nothing shows this as well as the price action of Yearn.finance (YFI), which has almost halved since its highs of $44,000 set just weeks ago. The coin now trades at $24,000 after it faced a series of technical and fundamental challenges that resulted in the drop.
There are some that think Ethereum DeFi is in the midst of a larger correction, especially as the industry is up hundreds of percent since the start of 2020.
Ari Paul, CIO and co-founder of crypto fund BlockTower Capital, recently commented:
“A basic trading rule (that I learned the hard way several times) is that when parabolic (true parabolic) advances break, you don’t look to buy until most of the parabolic move is reversed. In BTC tops, that’s meant waiting for 75%+ dips. In alts, 85%+. BTC had a clear parabola in 2017. A less clear one in 2019. Defi just had one burst.”
A basic trading rule (that I learned the hard way several times) is that when parabolic (true parabolic) advances break, you don’t look to buy until most of the parabolic move is reversed. In BTC tops, that’s meant waiting for 75%+ dips. In alts, 85%+.
— Ari Paul ⛓️ (@AriDavidPaul) September 6, 2020
Despite this sentiment, there remain factors that suggest DeFi is still on a macro path of growth.
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Ethereum DeFi Is Poised to Grow Even Further: Analyst
Ethereum’s correction over recent weeks has resulted in an acute pullback in the prices of DeFi coins.
As Qiao Wang, the former head of product at Messari and a prominent crypto writer, said: “Most DeFi bluechips trade like classic bubbles bursting.”
He isn’t wrong, most DeFi coins are down 30-50% from their recent all-time highs. Some coins, such as Curve DAO Token (CRV), are down even further than that.
Despite the strong correction, he thinks that Ethereum’s DeFi space is still on track for growth in the coming months. He went as far as to liken this segment of the crypto market to Bitcoin in spring 2013 as opposed to winter 2013. For context, Bitcoin underwent a short-term correction in the spring of 2013, then surged towards $1,000 in the winter and into 2014.
Wang cited three reasons why he thinks DeFi is still on the path of growth:
- Strong and improving fundamentals.
- The total market capitalization of the DeFi space, at around $13-14 billion, is still relatively small.
- A reflation and stimulus narrative is likely to play out next year.
Most DeFi bluechips trade like classic bubbles bursting. But IMO this is more like the spring 2013 bubble than the winter 2013 bubble. Why?
– Strong and improving fundamentals
– Total mcap still small
– Reflation + more brrrr likely next year
2021 will be great IMO.
— Qiao Wang (@QwQiao) October 1, 2020
Far From the Only One
Wang is far from the only one that thinks DeFi is still firmly set on this path of growth.
Andrew Kang and Spencer Noon are among the other prominent analysts in the space that have said they think DeFi remains in the early stages of a macro market cycle as opposed to the end of one.
Featured Image from Shutterstock Price tags: ethusd, ethbtc CHarts from TradingView.com These 3 Trends Show That Ethereum's DeFi Space Has Room to Grow