DeFi: The China Effect

The crypto scene can, at times, get murky. Supporters on each side of the divide tend to be vicious. Ironically, the emerging industry needs this to grow. Conflicting ideas and criticisms of all types often temper projects. This is exactly what confounds Bitcoin and Ethereum at the time of writing.

BTC maximalists wholeheartedly defend their projects, arguing that it is the original DeFi OG while Ethereans are confident of what the future holds. Just recently, one of them said every candlestick arrangement points to a moon sling.

How Are Bitcoin (BTC) and Ethereum (ETH) Faring?

Price action on both ends is flat. There is nothing tangible. Only pure, unfettered optimism. After last week’s deep correction, BTC is still struggling to break $10,500 while ETH got hit and is deep in red below $380. Even so, there are hints of recovery. A pullback from spot levels could spark demand. The only missing ingredient is participation. Traders are leaning on caution, and if candlestick arrangement in the weekly chart leads, there is every reason to play safe.

However, the performance of BTC—given how it wields control on altcoins, could determine the immediate trajectory of ETH and well, other altcoins. Even so, the activity-dense Ethereum piques interest. 

Interestingly, opportunistic traders are going against the wind, ramping up at spot rates. According to Santiment, non-exchange whales have upped their positions by 84 percent in the last month alone, pushing their cumulative holdings to 5.8 million from 3.16 million ETH.

Presently, in what has been termed as a “vampire attack” on the largest decentralized exchange in the world, Uniswap, Sushiswap—a splinter project, is migrating liquidity away from the DEX in a move that literally saps liquidity. This attack effectively paralyzes the trading of Ethereum tokens on Uniswap. Consequently, the problem will likely impact liquidity– considering how integral it has been in the past few months, and unnecessarily force users to make hard choices. Whether this will succeed or not, only time will tell. Already, the Ethereum co-founder, Vitalik Buterin, has criticized Sushiswap architects and their intentions.

The good news is that DeFi as a whole is diversified enough for farmers to profitably automate processes. And for this reason, more and more ETH continue to flow to innovative DeFi portals in their incessant search for superior yields.

The rise of yETH Vaults which pools coins from users, directing them to various lending protocols before buying more ETH from the open market, analysts project, will wipe out ETH from the open markets pumping prices as a result. This could explain why the Chinese are now flowing to DeFi, launching campaigns calling for users to ditch CEXes for DEXes and DeFi.

If DeFi is “getting started” in China ahead of a rumored Eth2 launch in November, do ETH bulls stand a chance?

Figure 1: ETH/USD Daily Chart by TradingView

First, the candlestick arrangement, as aforementioned, points to bears in the weekly chart. In the daily chart, ETH is trailing both the USD and BTC, falling 15 and nine percent, respectively in the last week of trading.

Technically, bears are in control. As long as prices tread inside Sep 5 candlestick and the middle BB, sellers are in control. A sharp pullback above $380 and $390, could spur demand lifting ETH back above $400 in a bull trend continuation.

Conversely, steep losses below $320 could be catastrophic for DeFi and ETH as prices will then likely fall to $250, or worse. Nonetheless, it is all not gloom and doom, the gradient may be negative but confidence abounds if the Total Value Locked (TVL) in DeFi counts.

If the relationship with ETH prices is positive and TVL is increasing, are bulls justified to add to their longs? Hopefully, China comes through, and ETH staking comes sooner than later.

Previous Analysis:

Crypto Market Capitalisation Hits $2.4 Trillion

May 06,2021

Ethereum (ETH) Rallies to All-Time High of $3500

May 04,2021

Coinbase and PayPal Joins Hands; BTC and ETH See High Whale Activity

Apr 30,2021

Bitcoin (BTC) Continues to Attract Institutional Money

Apr 28,2021

Bitcoin (BTC) And Overall Crypto Market Cools Down

Apr 15,2021

Expert Analysis

Apr 14,2021
In this article:
  • BTC
  • $51230
  • $51 + 2.4%
  • BTC
  • $51230
  • $51 + 2.4%
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