The DeFi’s market movement has been quite dismal over the past few weeks. Right from MKR, AAVE, and COMP to UNI, SUSHI, and YFI, almost all the top tokens from this space have been incurring losses.
Amid the larger downtrend or ongoing ‘winter’ phase, the overall value stuck in DeFi slipped to $ 85 billion yesterday – a level that was last seen in early October.
Curiously, the losses were negated right after as this metric registered a sharp hike over the last few hours. At the time of writing, DeFi TVL’s was north of $100 billion. The expeditious ‘W-shaped’ recovery can be seen on the chart attached below.
Interestingly, with this increase in TVL came an increase in the number of users. Even though the reading for this metric has been sloping since July of last year, it’s worth noting that it experienced quite a bit of turbulence midway through.
As can be seen from the snapshot attached below, the pace at which DeFi users have been entering the ecosystem has increased this week, when compared to last week.
So, is DeFi Summer finally on the cards?
As highlighted above, participants’ interest in DeFi started to sprout over the past day. Still, the chances of summer happening at this point seem unlikely.
More so, because the state of DeFi on Ethereum is pretty much in a lousy state right now. Despite the 2.3% rise over the last 24 hours, the DeFi index’s price has been oscillating around its multi-month low.
In fact, the aforementioned rise did not even hamper the ongoing downtrend phase much.
During most summer phases, this index has steeply risen. However, looking at its current state, it doesn’t look like it will change its trend anytime soon.
Another major factor that can be taken into account at this point is Ethereum’s net transfer volume. At the time of going to press, this metric was positive. This means that net inflows have dominated net outflows lately.
Now, one may wonder what do ETH flows have to do with the performance of DeFi. Well, there’s a connection – Ethereum is the base collateral for most DeFi assets. So, a substantial part of the outflows from exchanges resonates with the tokens’ drift into the DeFi ecosystem, apart from private wallets and cold storage.
The past summer phases, whether it was September of last year or the first few months of this year, were mostly marked by huge Ethereum exits from exchanges. So this time around, too, things should change for DeFi tokens to rally.
What’s more, most of the industry’s coins do well when Bitcoin does well. Similarly, DeFi tokens have historically fared better during Ethereum’s bullish phases.
Ergo, if Ethereum starts to recover and flourish, the market may well see another DeFi summer. However, if Ethereum’s choppy phase continues, DeFi tokens would struggle to rally.
