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The DeFi season could end when Bitcoin and Ether pack their bags for the moon

October 24, 2020

After the price of Bitcoin successfully broke the $ 12,000 mark after PayPal announced it would venture into digital assets, October meets the excitement that September failed to deliver. Given that on-chain and market data continue the bullish signals for Bitcoin (BTC), experts believe a 2017-style rally could be on the way.

Ether (ETH) price has also rebounded, although confidence in DeFi has started to wane as industry growth and hype wear off. DeFi was the main driver of cryptocurrency popularity in 2020, but now other digital assets appear to be thriving and could reach sizeable levels by the end of the year.

What about bitcoin?

According to a recent report from Finder – an online comparison resource – with 30 industry experts, Bitcoin price is expected to hit $ 14,283 by the end of the year. And according to Andrew Munro, editor of Finder Cryptocurrency, Bitcoin’s reputation as a reliable store of value is the main reason behind the generally optimistic outlook. He said to Cointelegraph:

“Many panellists noted that BTC is increasingly finding a place in traditional portfolios and being bought by both institutional and retail investors as a hedge against inflation. Given the unprecedented quantitative easing efforts by central banks, some panellists from around the world speculated that BTC is becoming a big deal widespread store of value. “

The DeFi season could end when Bitcoin and Ether pack their bags for the moon
The DeFi season could end when Bitcoin and Ether pack their bags for the moon

Other experts have cited numerous reasons behind Bitcoin price rally, namely an increasingly clear regulatory framework in the digital asset market and the numerous setbacks associated with fiat currencies such as inflation and negative interest rates.

While the panel mean forecast Bitcoin price of $ 14,283 by the end of the year, other predictions suggest a much higher priceThis is especially true for the famous stock-to-flow model of the anonymous analyst PlanB.

Can Ethereum keep up?

While Bitcoin is showing signs of strength versus other cryptocurrencies, Given the increasing dominance of trade and market cap, industry participants also have a positive outlook on Ether, which is up 40% averaging $ 513 at year-end. In the long term, however, experts are not so sure about the sustainability of ether. Munro said: “The most cited factor behind Ether’s near-term optimistic outlook was the expected launch of Ethereum 2.0 before year-end and the impact of the stake on circulating supply.“.

Ethereum’s popularity has increased over the course of 2020 due to the surge in DeFi, but some skepticism has been expressed about DeFi’s prospects and long-term sustainability. Although many are waiting for Ethereum 2.0 to launch, it can take years to complete. According to Jonathan Hobbs, author of The Crypto Portfolio and a former digital assets fund manager, Cointelegraph said this was one of the reasons behind Bitcoin’s positive returns:

“The games on Defi got too speculative earlier in the year, as is usually the case in this industry. We can see some of those flows are now moving back towards Bitcoin, with Bitcoin dominance continuing to increase after the sale DeFi sector “.

DeFi is losing power

With DeFi’s profits slipping back to Bitcoin in the old season, the long-term sustainability of decentralized funding could be called into question. In a CryptoCompare survey, 26 exchange operators at the most important trading venues were asked about the future of decentralized exchanges Only 7.7% thought it likely that DEXs would outperform centralized exchanges within two years.

It is clear that DEX activity is slowing down, but some believe that this is really good in the long run. Lanre Jonathan Ige, a researcher at Amun AG – publisher of products traded on cryptocurrency exchanges in Europe – told Cointelegraph:

“The decline in DeFi’s immediate publicity will be disappointing for short-term traders but should be overall good for the industry. The summer bubble was unsustainable but showed that various aspects of DeFi (lending, trading, DAO) are great for certain use cases useful. “

While sustainability seems to be the main obstacle to long-term success of Decentralized Finance, both in terms of the benefits of DeFi and the technical details of Ethereum, others have a seedy crypto industry, complicated interfaces, and a general lack of popularity as a deterrent for the continued growth of DeFi. Munro stated: “73% of the panel said “Fraud, Excessive Hype, and Market Manipulation” is a major barrier to DeFi’s growth. Some compared DeFi to the 2017 ICO boom“.

However, many remain hopeful at DeFi. In fact, most of the panelists in Finder’s Crypto Report said so DeFi apps are likely to grow steadily in terms of banned value and number of users over the next 12 months. Ilya Abugov, Principal Analyst at DappRadar also believes this is the case, telling Cointelegraph: “There is currently less media hype at DeFi. There was a lot of backlog in the summer and now there is a sober moment.“”

Institutional interest is growing

While DeFi may have been the catalyst for the summer’s crypto activity, according to Lanre, institutional interest could be the driving force for Bitcoin to move forward, especially as big companies like MicroStrategy, Stone Ridge and Square are now getting involved.

The stock traders consulted in the CryptoCompare survey believe this is also the case. since 92.3% confirm that institutional investment in digital assets will increase over the next two years. According to Hobbs, the scarcity and deflationary nature of Bitcoin are some of the factors influencing institutional interest in investing in digital assets: “Ninety percent of the world’s Bitcoin has already been mined. Still, ninety percent of the world’s dollars were definitely not printed. I think this narrative is gaining increasing attention from institutional actors“.

In the meantime, some institutes are still relying on the DeFi sector. Pantera Capital recently announced in a webinar that DeFi will be the focus of the next bull rally. While many still believe in DeFi, most seem to believe that DeFi’s price hike cycle is already complete and that the growth of the industry will be slower, especially since Ethereum is scalable.

Although the outlook is generally positive, many remain concerned about the latest regulatory news like the U.S. lawsuit against BitMEX and the UK Financial Conduct Authority’s ban on the sale of crypto derivatives. Sale. Will more regulatory restrictions follow or is it clear that they will navigate to Bitcoin and cryptocurrencies from now on?