Decentralized trading volume (DEX) has been steadily declining, and the DeFi token's price is not so optimistic that investors have turned their focus back to the leading cryptocurrency - Bitcoin.
All eyes are on Bitcoin as the digital asset continues to make new highs in 2020. Meanwhile, the hype surrounding decentralized financial projects continues to decline, especially as token prices plummet.
The data shows that the trading volume on decentralized exchanges, also known as DEX, is declining rapidly, further signaling the sector's decline. DeFi.
According to the report, the hacker performed a quick loan mining, using millions of dollars in cryptocurrency on both Uniswap and Curve to devalue Tether (USDT) and USD Coin (USDC) on Harvest Finance.
The attacker then bought those tokens at a bargain, used them to repay the initial quick loan and reap a huge profit in the process. By doing this several times, the volume at Uniswap has increased.
Although the attack increased the daily DEX volume to more than $ 5 billion for the day, this anomaly was only short-lived and since then, the volume appears to have steadily declined.
During the second half of October, DEXs saw their worst week in trading volume since August. Weekly volume dropped from a record of $ 10 billion in the first week of September to around 8. billion USD from 8-9 October. Uniswap still leads with 3% market share in total DEX trading volume.
Despite the massive correction seen on DeFi assets and falling transaction volume, the total value locked is still near record highs. Data from DeFi Pulse shows the total locked-out value is now $ 11.2 billion, slightly down from an all-time high on October 25 of $ 10 billion.
The DeFi season ends as soon as the Bitcoin bull returns
As the hype surrounding the decentralized financial sector dwindled, Bitcoin once again became the focus of attention. Bitcoin's price has risen about 24% since the beginning of October, with many huge investments made by giant companies like Square and Paypal. This could triple Bitcoin's user base in the near future.
The decline in trading volume for DeFi shows that traders are no longer interested in profit taking and are returning to Bitcoin. This is further reinforced by the increased volume seen on Bitcoin derivatives.
Although it is difficult to discern the impact of large organizations on action Bitcoin price, but recent acquisitions and an increase in Option and Future Contract volume suggest that the bulls are playing.
Following PayPal's announcement that it will add Bitcoin to its platform, the price of BTC has increased by almost 10%. On October 23, Grayscale announced that $ 10 million worth of crypto assets had been added in just one day, and that $ 300 billion in assets is currently under the company's management.
Can DEXs exist?
With investors shifting their focus back to Bitcoin, some wonder what the future holds for decentralized assets. The total value locked in DeFi remains high, but this could soon change due to a drop in trading volume on exchanges.
Since a large portion of the rewards on DeFi protocols are linked to trading volume, lower volumes will result in low yields on liquidity providers and less investor interest in DeFi.
According to Ilya Abugov, principal analyst at DappRadar:
It's been down a bit since the end of the summer, but I think that's natural. The inflating exceeds the actual growth and, therefore, entails a period of freezing. From a fundamental perspective, however, nothing spoils the growth story of DeFi and DEX. New projects are being developed.
Despite facing real challenges, a number of DeFi projects continue to receive strong investor interest. On October 28, Yearn.finance founder Andre Cronje released Keep10r - a decentralized employment platform powered by the KPR token market for technical jobs.
Despite the lack of announcement, investors took the opportunity to participate in the project, and traders pushed the price of KPR up 570% from $ 24 to $ 162.58. The project also had a trading volume of more than $ 255 million in its first trading day.
The hype surrounding Keep3r shows that interest remains if a suitable project emerges. New projects and developments in DeFi can help generate interest in this area.