- The price of Ethereum showed a possible decoupling from DeFi tokens.
- However, TVL metrics showed DeFi’s contribution to Ethereum’s TVL.
Ethereum [ETH] became famous for introducing an innovative concept called smart contracts, which revolutionized the world of decentralized finance (DeFi).
However, according to recent reports, the price of ETH, Ethereum’s native cryptocurrency, has gained ground against the established tokens of DeFi’s leading projects. This development indicates a possible decoupling between Ethereum and these blue-chip tokens.
Ethereum price decouples from DeFi tokens
According to recently Glasnode data, a notable divergence in price trends between Ethereum and ETH DeFi tokens has come to light.
The data showed that after the “DeFi Summer” in January 2021, DeFi tokens began a faster upward trajectory than ETH. However, this rise was short-lived as there was a significant drop in May 2021, followed by a sustained decline.
Even during the latter part of the 2021 bull market, DeFi tokens reacted less well to positive market movements. This may be due to the market’s growing preference for NFTs during that period.
Source: Glassnode
Furthermore, it was worth noting that the DeFi index failed to surpass its previous all-time record in May. It remained -42% below it, despite ETH prices reaching new all-time highs in November 2021.
From January 2023, there was a breakdown in the correlation between Ethereum and DeFi tokens. It indicated a disconnect between the activity around DeFi tokens and the overall ETH market performance so far this year.
Wallet addresses are declining
Since March, there has been a significant and rapid drop in new addresses for DeFi tokens. Based on the observed chart, only around 600 new wallets of DeFi tokens were seen to be created on a daily basis.
This indicated an ongoing battle for DeFi tokens to capture investor attention. Interestingly, this battle continued even as ETH prices started to recover in the first quarter of 2023.
Source: Glassnode
In addition, the monthly average of new addresses has remained consistently below the annual average, with the exception of a notable spike that occurred around the time of the FTX collapse.
However, it is important to note that this spike does not indicate new demand for DeFi tokens. Instead, it became primarily associated with divestment from DeFi tokens as the market’s perception of risk increased.
Ethereum TVL shows the decline of Defi
At the time of writing, Ethereum’s Total Value Locked (TVL) is per Defillama was $26.84 billion. What stood out about the TVL was that Lido, a liquid staking platform, was responsible for more than 40% of the TVL.
Other DeFi platforms made up the top five biggest TVL contributors to Ethereum’s TVL. A look at the general trend of the TVL showed that it was undergoing regular activity with no significant up or down trend.
Read Ethereum (ETH) Price Forecast 2023-24
Weak bullish trend flash in price trend
When examining the daily price trend of Ethereum, it was clear that it was currently on a downward trend. Nevertheless, looking at ETH’s overall performance over the year, the price is up more than 50% so far.
At the time of writing, ETH was trading at around USD 1,856, reflecting a drop of almost 1%. While the trend was still technically bullish, it appeared relatively weak. Also, a further fall in prices could lead to a shift in the current trend.
Source: TradingView