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May 4, 2021

Can the hype surrounding DeFi return?

For people new to the market, DeFi was the hottest thing out in crypto land in 2020. But since the advent of NFTs, that seems to have changed. In this article, I'm going to discuss why I think DeFi could become a hype again after all.

Can the hype surrounding DeFi return? By Steven Eblé
Can the hype surrounding DeFi return? By Steven Eblé

Two weeks ago I wrote the article 'the future of Ethereum'. In that article, I mentioned that the future of Ethereum will largely be influenced by the future of DeFi. DeFi is largely built on the Ethereum network. Following that article, I wondered: why is it so quiet around DeFi?

What is defi?

Decentralised Finance (or simply DeFi) refers to an ecosystem of financial applications built on the blockchain.

More specifically, Decentralised Finance refers to a movement that aims to create an open-source, permissionless and transparent financial ecosystem. In other words, a system that is accessible to everyone and functions without a central regulator.

The biggest advantage of DeFi is that it provides easy access to financial services, especially for those outside the current financial system. Another potential benefit of DeFi is the modular framework on which it is built. Compatible DeFi applications on public blockchains have the potential to create entirely new financial markets, products and services.


Defi Perpetual futures

DeFi perpetual futures is a basket of the 25 largest DeFi projects. So with a DeFi perpetual future you can get access to 25 different DeFi projects. Defi Perp also gives a good impression of how the DeFi market as a whole is doing. By applying a Technical Analysis to Defi Perp I'll indicate what the possible expectations are for the DeFi market as a whole.

Below we see the graph of Defi Perp. There are two things that strike me about that chart. Defi Perp has broken out of a 3 month long consolidation bullish. The measured move of this pattern is 30% higher than the current valuation.

Also the downsloaping diagnostic resistance on the rsi has been broken. This can be seen at the top of the chart. The breaking out of the resistance on the rsi and the break out of the pattern make it likely that the DeFi market will have a lot of upside in the coming months.



DeFi coins compared to Bitcoin

Below, I have shown the 12 largest DeFi projects with different colors relative to Bitcoin. From this chart, I think it can be seen that many projects made their peaks on the BTC pairings in January 2021. Subsequently, many coins dropped in their valuation relative to Bitcoin.

Using the Fibonacci retracement tool you can see that almost all coins have made a 618 retrace, also called a golden retrace . After 618 retracements crypto currencies often start a new impulse wave.

DeFi has lost much of its hype recently. I think this was caused by emerging NFT hype and the fact that Ethereum 2.0 was once again delayed. Meanwhile, DeFi perp has broken out of a months-long consolidation and almost all DeFi coins have made a 618 retrace on their Bitcoin pairing.

All this together makes it likely that DeFi will start to grow and become a hype again in the coming months.



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