Ethereum DeFi TVL clocks all-time high but protocol tokens lose value

ethereum defi tokens lose value
“Ethereum DeFi TVL clocks all-time high but protocol tokens lose value” Image by BeatingBetting.co.uk via Flickr.
  • Total value locked in Ethereum-based DeFi protocols logged a new all-time high of $160 billion.
  • But native tokens of these protocols have consistently lost value against rising TVL.
  • Fresh capital infusion in DeFi token markets remains uncertain.

BENGALURU (CoinChapter.com) – Ethereum’s DeFi ecosystem logged a new high on the total value locked (TVL) front. Funds locked in peer-to-peer finance protocols built atop the largest smart contracts platform rose from $88 billion to nearly $160 billion. Moreover, the 45% appreciation in TVL took place within a 3-month window.

Ethereum DeFi TVL Charts New Highs

Ethereum dominates the cryptocurrency space in DeFi application usage. New data shows that these applications have attracted significant funds from users. According to Delphi Digital, the trend has led to the second-largest blockchain’s DeFi ecosystem logging a record-high total value locked (TVL) figure of $160 billion.

Related: Ethereum (ETH) jumps 10% amid DeFi, NFT activity surge, and on-chain developments
Ethereum DeFi TVL clocked a new high of $160 billion
Ethereum DeFi TVL clocked a new high of $160 billion. Source: DefiLlama

Lending platforms AAVE and Maker and decentralized exchange (DEX) Curve took the top 3 spots on the leaderboard. Curve Finance, in particular, has helped traders with volumes north of $100 billion since its inception in January 2020. The platform’s native token CRV took a lot of flak for a severe price crash led by rapidly increasing supply. But the scenario changed later.

“At the time, CRV’s token economics were heavily criticized, but they’ve since proven their token model works and is potentially one of the most efficient across DeFi projects.”

noted the crypto research, consulting and investment firm
 Related: DeFi boom underway as Bitcoin rally stalls: UNI, COMP, and MKR in focus

But the market performance of DeFi tokens has been lackluster. Compared to the broader cryptocurrency market, native tokens of different protocols have failed to meet investor expectations (read explosive price growth). Thus, contrary to surging TVL inflows, the market performance of DeFi assets has declined considerably.

Decentralized Finance Tokens Lose Value

One metric which provides a fair overview of DeFi token market performance is the DeFi Pulse Index (DPI). In detail, it is a capitalization-weighted index that keeps track of the DeFi token performance across all markets.

Delphi Digital researchers noted that DPI had declined markedly as compared to Ethereum. As per their findings, a resurgence of the original layer one blockchains has resulted in the value depreciation of DeFi assets. To the point that the possibilities of renewed capital infusion look bleak/uncertain.

“L1s have been hogging the limelight lately, seemingly at the expense of DeFi tokens. For now, they continue to remain out of favor and it’s not clear what could catalyze fresh capital inflows.”

DeFi Pulse Index peaked at $604.27 before the May 2021 crypto market crash. Since then, the metric has lost 44% value and is currently trending at $340.54.

DeFi Pulse Index went down significantly in the last 5 months
DeFi Pulse Index went down significantly in the last five months. Source: TokenSets

How Does The Future Appear?

DeFi Index Perpetual Futures, an FTX specific index derivative that tracks the price of a basket of different DeFi coins, formed a bullish technical setup on the daily chart. The DEFIPERP momentum since September 7 seemed to converge in an Ascending Triangle formation.

In technical analysis, an Ascending Triangle setup generally points at an asset’s bullish near-term future. The degree of recovery is always proportional to the height of the perpendicular side of the triangle. In the current setup, that height measures 5808 units.

Ascending channel formation on the daily DEFIPERP chart.
Ascending channel formation on the daily DEFIPERP chart. Source: DEFIPERP on TradingView.com

A 5800 unit upside move from current levels would take DEFIPERP to 18696. Despite the index’s representation of a few DeFi tokens, the rally would signify growth for most DeFi token markets. Also, the supposed jump would lead to a new all-time high.

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