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These Factors Show DeFi is Bullish Despite 50%+ Drop Seen by Many Crypto Tokens

The DeFi sector has been struck hard by the recent downturn seen across the aggregated crypto market, but it has not been able to match the momentum seen by Bitcoin and Ethereum as a result of their recent rallies.

DeFi tokens – due to their immense volatility – are considered to be “high beta,” which means that their prices will only rise when investors are comfortable and confident that the macro landscape is stable.

Until BTC and ETH can stabilize around their current price levels or continue their ascents, the DeFi sector may continue stagnating.

One analyst is noting that this relatively small fragment of the crypto market is still incredibly bullish from a fundamental standpoint.

To justify this sentiment, he points to the total value locked and the market capitalization of ERC-20 stablecoins.

He also notes that although DeFi remains bullish, it’s a matter of timing regarding when quality tokens within the space will begin rising again.

DeFi Sector Stagnates Despite Rallies Seen by Broader Crypto Market

Bitcoin’s decline from highs of $12,400 in late-August is what began placing headwinds on the entire market that ultimately resulted in the short-term downfall of the DeFi sector.

Once Ethereum’s price collapsed from $490 and began reeling lower, the sector’s short-term fate was sealed, and many tokens began posting massive losses daily.

Bitcoin and Ethereum are now rebounding, with ETH trending up towards its yearly highs while BTC sets fresh ones.

This indicates that capital may soon spill over into higher risk crypto assets, but it remains unclear when this rotation might occur.

Investor: Two Key Metrics Show How Bullish DeFi Currently Is 

One prominent crypto investor and Ethereum-focused analyst explained in a recent tweet that two key metrics show just how bullish the DeFi market truly is at the present moment.

He points to a total value locked (TVL) of $12.41 billion, as well as $14 billion stored within ERC-20 stablecoins.

“Despite a month that saw most tokens fall 50% or more, DeFi is *still* at ATHs with its most important indicators: – TVL: $12.41B – ERC20 Stablecoins: $14B. Don’t listen to the degens who burned out. Phase 2 of this DeFi bull market will make this summer look like nothing.”

As for when this part of the crypto market might begin resuming its uptrend, he believes that the election will be the “inflection point” for phase 2 of the bull run.

Featured image from Unsplash.