Ethereum and DeFi Markets Insights:
- As the Ethereum (ETH) price rally enters its third consecutive week, investors have started to switch focus to DeFi projects.
- Over the last two- weeks, crypto traders have invested fresh capital inflow of $10 billion dollars in various DeFi tokens hosted within the Ethereum smart-contract ecosystem.
- Top Decentralized Exchange (DEXs) like SushiSwap (SUSHI) and Uniswap (UNI) recorded significant trading activity this week, suggesting an impending wave of additional capital inflows.
Ethereum (ETH) price has reclaimed the $1,900 milestone as the crypto market rally enters its second consecutive week. However, recent trading activity trends from last week show that investors are now shifting capital toward the DeFi market.
Crypto Traders Capitalized on Ethereum Price Rally to Invest $10 Billion in DeFi Tokens
Over the last two- weeks, Ethereum price has gained 25% rallying from $1,540, to reach $1,910 between October 19 and November 5 2023. As the crypto market rally matures, investors and now growing increasing confident and looking towards relatively riskier small-cap projects outside the top 10 crypto market rankings.
The ETH price rally appears to have attracted investors’ attention toward several DeFi projects built on Ethereum smart-contract network. As Ethereum price grew by 25% between October 19 and November 5, the total market valuation of DeFi tokens has also increased significantly.
The chart above shows that Total DeFi Marketcap increased from $41 billion to $51 billion during that period. This implies that crypto traders have invested an addition $10 billion dollars in various DeFi tokens hosted within the Ethereum smart-contract ecosystem over the last two weeks.
SushiSwap (SUSHI) Has Emerged the Hottest DeFi Token This Week
Sushiswap (SUSHI) is a Decentralized exchange (DEX) built on the Ethereum network. Similar to Uniswap (UNI), Sushiswap facilitates the transfers, trading and lending of various Ethereum-based DeFi tokens on the.
On-chain data trends show that SushiSwap DEX witnessed significant volume of activity this week, as investors’ demand for DeFi tokens increased. In effect the price of SUSHI rapidly increased by a whopping 58.55%, emerging the top gainer in the DeFi sector over the past week.
Typically, when the native token of DEXs like SushiSwap begin to rally, it suggest that investors are increasing moving funds towards DeFi assets that are being traded on those trading platforms.
Hence, SUSHI toping the DeFi gainer’s chart last week, is an indication that more capital could flow into the DeFi market next week. Tokens like Raydium (RAY), Opulous (OPUL) and Venus (XVS) are some rising DeFi tokens to keep an eye on for next week.
How Will Ethereum Price Increase Impact the DeFi Market
DeFi projects are blockchain-based platforms built on the Ethereum smart contract network. They provide a wide-range of decentralized finance service such as, payment, lending, savings borrowing, NFT minting, gaming etc.
In the past, once the Ethereum price rally heat ups and it automatically drives up the price of Gas —the fees that traders pay to carry out transactions on DeFi platforms. This then discourages investors from carrying out economic transaction with Ethereum-based DeFi tokens once Ethereum price increase, and network congestions set in.
However, since the Ethereum has transitioned from Proof-of-Work to Proof-of-Stake, the average transaction fees has been reduced significantly. Also, the emergence of L2-scaling protocols like Optimism and Arbitrum have helped eliminate incidences of congestions on the Ethereum Layer-1 blockchain.
Hence, with the risk of high-fees and congestion eliminate, crypto investors can expect DeFi tokens to keep booming in the coming days even as ETH price enters new peaks.