DeFi down bigly, when will it begin recovering?
Throughout early February, the DeFi market has outperformed the rest of the cryptocurrency market.
Two DeFi blue-chips SushiSwap and Aave performed particularly well in the past month.
Aave has seen a strong rally due to its dominance as the most widely-utilized lending protocol. It is considered to be the go-to DeFi bluechip and major investors believe it could surpass the valuation of the most valuable fintech company during this cycle.
Yet, the valuation of Uniswap achieved $6 billion earlier this week, while the valuation of SushiSwap remains well below $2 billion.
The crypto market is largely cyclical; hence, profits often flow into Bitcoin from altcoins and vice versa. This means that once the initial wave of profit-taking passes, DeFi would likely recover once again.
Tyler Reynolds, an entrepreneur and an investor in DeFi, said that the DeFi market is still so small. As such, over the long term, DeFi would likely rally strongly with the momentum of AAVE and other DeFi tokens, especially throughout 2021. He said:
“Here’s the thing — DeFi is still so small that BTC and ETH can stay flat or even moderately increase and DeFi can still drop >40% At some point, everyone who has bought has bought and there’s not enough cash on the sidelines willing to pay these prices. That said, I’m quite confident that none of the top coins have seen their highs for 2021 even if we dip for the next 2 months.”
Currently, the entire valuation of the DeFi market is comparable with three “OG” altcoins: Cardano, XRP, and Litecoin.
AAVE and SUSHI likely to recover first
AAVE and SUSHI would likely lead the recovery of the DeFi market when the appetite for DeFi tokens spark once again.
AAVE and SUSHI are already showing signs of recovery after defending the $13 support level and the $450 support area, respectively.
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