After the strong outperformance of Bitcoin (BTC) and Ether (ETH) in August, the decentralized financial tokens (DeFi) are now falling and recording losses of up to 50%.
Snapshot of the daily performance of the cryptocurrency market. Source: Coin360
At the moment, the two currencies are the most watched Yearn.finance (YFI) and Uniswap (UNI) both fell 46% and 48%, respectively, since hitting monthly highs.
YFI / USDT 4 hour chart. Source: TradingView
Three catalysts seem to be behind the correction: the ether pullback, the withdrawal of profits made during the previous BTC rally, and a heavy sell-off in DeFi tokens.
Most DeFi tokens have been corrected between 15% and 25%.
The vast majority of DeFi tokens fell between 15% and 25% that day. Even cryptocurrencies that aren’t directly considered DeFi tokens, such as Chainlink (LINK) saw prices drop by 15%.
While The decline in DeFi tokens coincides with the drop in the price of Ether. Many analysts expected a correction to the profit reduction.
For example, Yearn.finance became a dominant player in the DeFi market in less than three months. The price of YFI was up 1,200% against Binance to a high of $ 43,966.
Uniswap’s native governance token, UNI saw an equally explosive rise in a significantly shorter time.
As Cointelegraph reported, Uniswap has released 400 UNI tokens for each user who used Uniswap’s decentralized exchange before September 1st. At the peak at $ 8.80, the 400 UNI tokens were worth $ 3,520.
UNI recorded a massive price increase in a short time due to multiple listings on major stock exchanges. Within the first five hours after launch, Coinbase Pro, Binance and FTX listed UNI. As a result, The token price rose from $ 0.30 to $ 8.80 in less than five days.
UNI / USDT 4-hour chart. Source: TradingView
Due to the massive gains of DeFi tokens for its USDT and BTC pairs A correction for the withdrawal of income was widely expected. However, the intensity of this correction surprised many traders.
Ether is struggling to keep the momentum going
In the past, Ether has held rallies among altcoins, including DeFi tokens. In some bullish cycles, Ether was also ahead of BTC’s price. For example, From March to August, when the price of Bitcoin rebounded from the infamous Black Thursday crash, the price of Ether far exceeded BTC.
Since September 1st Ether has struggled to match Bitcoin’s performance. While BTC rose from $ 10,300 to $ 11,100, Ether stayed below $ 400.
In the last 20 days The price of ether fell around 28% and over the same period BTC saw a 12% drop against the US dollar.
Ether’s short-term weakness It was likely caused by the increased selling pressure on DeFi tokens. Hence the correction of almost 50% of companies like UNI and YFI in the last few days.
Bitcoin profit-taking starts DeFi correction
The mood at the BTC rally from September 9th to 19th is still mixed. Oddly enough Only BTC saw a sharp rise, while Ether, Altcoins, and most DeFi tokens stagnated. This is a little atypical as Bitcoin generally has a limited range altcoins rally and when Bitcoin is rising moderately. Altcoins can be left behind However, they still tend to follow BTC’s bullish price movement.
This short-term inverse correlation between BTC and Altcoins suggests so BTC saw an upswing after the profit pullback as investors passed their DeFi token profits on to BTC.