All eyes are on Bitcoin (BTC) as the digital asset continues to climb to a new high in 2020. Meanwhile, the hype around decentralized funding projects continues to die down, especially as symbolic prices fall. Data shows that the volume of trade for decentralized exchanges (DEX) is declining rapidly, further signaling the decline of the DeFi sector.
The recent Harvest Finance hack saw volumes explode in DEXs for a day, especially Uniswap and Curve. According to media and Harvest investors, the hacker performed a flash lending exploit that used millions of dollars in cryptocurrency on both Uniswap and Curve to lower the perceived prices of USDT and USDC tokens on Harvest. Finance.
The attacker then bought these tokens at a reduced price, used them to pay off the initial flash loan, and made a net profit in the process. By doing this several times, Uniswap’s volumes were inflated.
While the hack took DEX’s daily volume to just over $ 5 billion for the day, the anomaly was short-lived and since then the volume still appears to be steadily declining.
During the second half of October, DEX had the worst week in terms of trading volume since August. Weekly volume fell from a record $ 8 billion in the first week of September to around $ 3 billion from October 19 to 25. Uniswap continues to lead the pack with a 56% market share of all DEX trading volume.
Despite the major correction seen in DeFi assets and the reduction in trading volume, the total value locked in has remained near record levels. Data from DeFi Pulse shows the total locked-in value is currently $ 11.2 billion, down slightly from the all-time October 25 high of $ 12.46 billion.
DeFi season ends just as the Bitcoin bulls return
As the hype around decentralized finance recedes, Bitcoin is once again in the spotlight. The price of Bitcoin has climbed around 24% since the start of October, with several high-level bets being made by corporate giants like Square and Paypal, the latter of which may help triple the user base. of Bitcoin in the near future.
The reduction in trading volume for DeFi shows that traders have lost interest to some extent, taking profits and returning to Bitcoin. This is further reinforced by the increasing volumes seen on Bitcoin derivatives.
While it is difficult to discern the impact of institutional players on Bitcoin price action, recent acquisitions and surges in options and futures volumes indicate that the bulls are in play.
Following PayPal’s announcement to add Bitcoin to its platform, the price of BTC has increased by almost 10%. On October 23, Grayscale announced that $ 300 million in crypto assets had been added in a single day and that the company currently has $ 7.6 billion in assets under management.
Can DEXs survive?
As investors refocus on Bitcoin, some wonder what the future holds for decentralized assets. The total value locked in DeFi has remained high, but that may change soon due to the reduction in trading volumes on the exchanges.
Since a large portion of the rewards on DeFi protocols is associated with trading volumes, lower volumes will result in lower returns for liquidity providers and further decrease investor interest in DeFi.
According to Ilya Abugov, senior analyst at DappRadar:
“There has been a bit of a drop since the end of the summer, but I think it’s just natural. Periodically, the hype exceeds actual growth and is therefore followed by a bit of a quiet period. Fundamentally, however, nothing has damaged the growth story of DeFi and DEX. New projects are under development. ”
Despite real challenges, a number of DeFi projects continue to generate strong investor interest. On October 28, Yearn.Finance founder Andre Cronje launched Keep3r, a decentralized employment platform powered by the KPR token market for technical jobs.
Despite the lack of announcements, investors jumped at the opportunity to participate in the project, and traders pushed the price of the KPR token up 570% from $ 24 to $ 162.58. The project also saw a trading volume of over $ 255 million on the first day of trading.
The hype around Keep3r shows that the interest is always there if the right project comes along. New projects and developments in DeFi can help generate interest in the field and Abugov said:
“Now, in addition to wBTC, Ethereum DeFi will be introduced in Zcash and Dash packaged. DEXs facilitate asset trading and therefore should benefit from DeFi’s overall growth. Additionally, as we see the game to win grow in DeFi, we can see a greater interconnection of the gaming industry with DeFi. This activity is also expected to affect DEXs. “