data taken at 10:00am 18/09/2020
Written by: Yves, Head of Trading at Wirex
Here’s again another week of steady growth for the DeFi economy. DeFi pulse reports that the value of Bitcoins (BTC) locked is now above one billion US dollars . Even though there seem to be some very short periods of stagnation, the trend looks extremely strong. It is comparable to the growth of the Grayscale Bitcoin Trust (GBTC). The 107,000 BTCs locked in DeFi represent the fifth of the Trust’s size. Both the DeFi economy and the GBTC fund appeal to very different investors with different risk/return profiles. There is no direct competition for BTCs between the two, and they both contribute to the bullish trend of the BTC/USD price. The price is recovering slowly from the sharp correction incurred on September 2nd/3rd. It is up by 5.5% this week but still nearly 14% below this year’s high. The fundamentals are still clearly on the bulls side. The potential returns from lending or pledging BTCs, and the plethora of projects available give HODlers always more reasons to hold.
On the macroeconomics side, the Federal Open Market Committee Meeting (FOMC) that was held on Wednesday did nothing to reassure markets of the Fed’s ability to reach anything near the 2% inflation target in the short or medium term. The Fed rates are expected to remain low for quite a while. The unemployment rate will decline slowly, but it is expected to reach the pre-crisis levels in a few years only . As a result, Gold prices (XAU/USD) have been consolidating around $1,950, in line with inflation expectations. The Bitcoin bull trend is expected to ride the DeFi innovation trend rather than the longer-term inflation trend.
The Ether price (ETH/USD) is also recovering. Glassnode reports that “the Ethereum Miner Revenue reached another 5-year high” this week . The previous all-time high was reached only last week by the excitement around the SushiSwap project. The Gas fee explosion is still fueling the miners benefits. Glassnode reports that “a million USD in fees were spent in a single hour” yesterday . This time around, the culprit seems to be the launch of the Uniswap governance token (UNI) , its airdrop, and its listing on major exchanges, including Coinbase. The consequent swap of UNI for ETH pushed the number of on-chain transactions to an all-time high: more than 1.4 million transactions were recorded on the Ethereum Blockchain yesterday.
Uniswap is already sitting at the 26th place of the coinmarketcap ranking, joining the ranks of other major projects involved in the DeFi economy (Polkadot, (DOT), Chainlink (LINK), yearn.finance (YFI)…). Ethereum is now quoting above $380, still 21.6% below this year’s highest level , a large gap that could be easily considered as an opportunity, if it weren’t for the looming risk of miners and whales dumping the cryptocurrency. Indeed, Nairametrics reports that the number of Ethereum whales has been growing these past few weeks. Eventually, as their long-term interest is aligned with the interest of HODLers, the pressure should ease.
Other cryptocurrencies are usually lagging this week, including Ripple. Despite more announcements of partnerships on the horizon, almost all of Ripple’s initiatives fail to convince or realize. For instance, the suggestions of the 30+ pages report issued mid-june on “the Path forward for digital assets adoption in India” seem to have fallen on deaf ears. Ripple’s CEO Brad Galinghouse mentioned two days ago his disappointment towards the introduction of a new law “banning trade in cryptocurrencies” in India … The Stellar Lumens price (XLM/USD) is also lagging, still looking for ideas and potential developments. Today more than ever, every blockchain project should be eager to find its breath of innovation, like DeFi for Ethereum.
The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.