Many decentralized financial brands with high inflation are constantly correcting despite the pressure from Bitcoin to hit new annual highs.
IntoTheBlock’s research suggests this DeFi token prices and log metrics have varied significantly since September. The total locked value has fallen around $ 1 billion in the past few days but is still near its all-time high.
However, Token prices are still in the red and many are down more than 50% from their previous highs. According to the report, this divergence is likely due to a change in the risk environment as investors choose to hedge profits.
Highlights that Many investors are concerned about high token supply inflation in an area that is still in its infancy. The hardest hit high-inflation supply brands are Compound, Balancer, MCDEX, Curve and mStable, all of which have fallen at least 60% since early September.
“This shows that while liquidity mining can fuel demand on the supply side, tokens can also suffer setbacks, similar to devaluation from hyperinflation.”
In general, DeFi governance tokens based on Ethereum have fallen by around a thirdLast month alone from $ 7.5 billion to $ 5.07 billion in terms of market capitalization.
Stable coins and packaged versions of Bitcoin continued to add to their market capitalization, which further confirms that high-yield farmers have moved from high-risk DeFi tokens to low-return, lower-volatility assets.
The report suggests that The catalyst behind the DeFi madness, Compound Finance, may also have triggered the correctionas it marked the turning point for such rapid growth.
After the COMP token launched, hundreds of clones and forks were created, each with their own governance tokens and income farming pools. At least initially, many initially saw liquidity and token prices spike until the markets collapsed in September.
“Governance tokens, especially those with high inflation rates from liquidity mining, have declined significantly since then.”
The highly anticipated Yearn Finance token has also achieved great success. According to IntoTheBlock’s DeFi app Most of the YFI addresses who purchased the token in the past two months are now “out of money”.. YFI is down nearly 70% from its high of $ 44,000 on September 13.
Some DeFi protocols responded to this apparent exodus of investors with compound and pickle and reduced their bid emissions while Aave enabled staking out through a “security module” that acts as a reserve mechanism against liquidity shock.
The investigation showed that These price swings and large withdrawals are normal in such an emerging market, and DeFi tokens only make up a tiny amount (less than 2%) of the total cryptocurrency market cap.
On the positive side, it should be noted that The DeFi sector continues to thrive despite declining tokens and there is plenty of room for growth as these systems are expanded and adopted.