The DeFi sector has been on the rise in recent weeks. The post-summer downtrend was first reversed in early November when Yearn.finance’s YFI token bottomed at $ 7,500 and saw a massive surge to $ 18,000 overnight.
From then on, the cryptocurrency has risen every week, showing signs of strength and providing tailwinds for the rest of the market.
YFI wasn’t the only “blue-chip” sector benchmark to reverse its downtrend earlier this month, as many other major tokens rose at the same time.
This industry-wide move was supported by the strength of Bitcoin, Ethereum, and the rest of the cryptocurrency market.
The rise in ETH was particularly significant for smaller DeFi assets, which get most of their trading volume from Uniswap as their 50/50 pools are denominated in Ethereum.
An investor now notes that while these higher beta DeFi assets generally outperform the rest of the market, they lag well behind the supposed “benchmark” tokens in the sector.
The DeFi market is closely following the price development of Ethereum
Ethereum has been leading the altcoin market lately, with its price trend largely dependent on Bitcoin.
Currently, the bulls and bears at ETH are fighting to keep the cryptocurrency above $ 600. The selling pressure above this price level has been significant and could further hamper its price movement until Bitcoin can break its all-time highs.
The DeFi Perpetual Swap Basket for FTX, which tracks the performance of a handful of key industry-specific projects, has risen from its monthly lows of $ 800. The current price is around $ 2,400.
However, this is a massive drop from the recent highs of $ 6,000 set a few weeks ago. This suggests that investors aren’t sure where this fragment of the market is headed next.
It is important to note that this gives a general indication of the sector’s performance as the exact price of the DEFI-PERP is influenced by margin usage, funding rates and other metrics.
Rebound of the blue-chip lead sector
A prominent investor listed in a new tweet that the DeFi sector is growing more efficiently and that the larger projects outperform their smaller counterparts.
“Wow, incredible differences between different DeFi tokens, with the blue-chip tokens faring significantly better than the markets since the beginning of the month.”
Image Courtesy of Su Zhu. Source: TradingView.
Where the Bitcoin and Ethereum trend will undoubtedly affect the DeFi sector in the medium term. As long as no fresh private customer money flows into the market and investors are interested in multipliers, the larger tokens can continue to outperform the smaller ones.
Featured image from Unsplash. Charts from TradingView.