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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning
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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning

How The Crypto Winter Has Impacted The DeFi Sector

Reynaldo Marquez
Reynaldo Marquez
3 years ago
2 mins read
Crypto Ethereum and Bitcoin

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Created by industry experts and meticulously reviewed
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The crypto market trends to the downside as major assets are unable to break above local resistance. As per usual, the dominant trend picks winners and losers and unfortunately, the altcoin markets have been amongst the latter.

Related Reading | As Bitcoin Slumps, BTC Miners Sell Of Their Tokens Creating Panic In The Market

In particular, decentralized finance (DeFi) protocols have been severely impacted by the crypto downtrend. Some of the most popular protocols in the Ethereum DeFi sector, perhaps the biggest ecosystem in the space, record as much as 92% in losses.

Jack Niewold, founder of Crypto Pragmatist, set out to dig deeper into the effects of the crypto winter in the DeFi sector. One of his objectives was to determine if DeFi protocols can stay profitable in this downtrend.

As seen below, protocols like MakerDAO, SushiSwap, Compound, and others saw a decrease in the price of their native tokens and an even more steep decline in their revenue. This evidence put into question the idea that DeFi and crypto, as Niewold said, “really reached an inflection point”.

Crypto DeFi
Source: Jack Niewold via Twitter

There is evidence of maturity in the space, institutional adoption, and resistance to overall market declines in larger cryptocurrencies. However, most of the DeFi sector has been unable to retain its revenues. Niewold noted:

To be fair, most DeFi tokens have drawn by more than their fee rev, which is interesting–from a ‘fundamental’ perspective, stuff is trading at a discount. I think that’s the first takeaway for me, that projects with real product market fit are trading at a relative discount.

Additional data provided by DeFi Pulse indicates the total value locked (TVL) across DeFi protocols has been trending to the downside with revenues and token prices. This metric returned to its February 2021 levels and stands at around $50 billion.

DeFi Crypto DeFiPulse 1
DeFi TVL trends to the downside. Source: DeFi Pulse

Crypto Bleeds As Ethereum Dominance Rises

The current downtrend is more palpable across the entire layer-1 ecosystem. While Solana (SOL), Avalanche (AVAX), and others experience a dropped in their prices and network activity, Ethereum (ETH) benefits.

The downside trend has translated into a decrease in Ethereum fees. These are currently priced at 2 Gwei or $0.13 for a fast transaction after averaging 100 Gwei or more during network congestion.

As Niewold said, L1 networks such as Solana and Avalanche benefited from a rise in Ethereum transaction fees, as these declines, users return to this network. Niewold said:

(…) in a period of decreased demand, it makes Ethereum a lot more attractive relative to alt-L1s (…). Alt-L1s do not benefit from this fee reflexivity, as their competitive advantage dies down in periods of lower activity.

As NewsBTC noted yesterday, Bitcoin, Ethereum, and stablecoins USDT and USDC, form 77% of the total crypto market cap. BTC and ETH dominance has been on the rise during this downtrend and hints at an overall de-risking behavior from crypto investors.

Crypto Bitcoin dominance market cap
Bitcoin, stablecoins, and Ethereum dominance are on the rise. Source: Arcane Research

Related Reading | Ethereum Market Cap Cut By Over $100 Billion Last Month

At the time of writing, ETH’s price trades at $1,800 with a 2% profit in the last 24-hours.

Ethereum ETH ETHUSD DeFi crypto
ETH moving sideways on the 4-hour chart. Source: ETHUSD Tradingview
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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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