One way to maintain investment gains is to understand asset or sector timing. That is, knowing when there is an evolution from one asset or sector to another. This attribute is even more relevant in the highly volatile digital asset industry, where a market swing can turn a crypto billionaire into a flat broke commoner.
It is an open secret that the non-fungible sector has surged massively in popularity for more than two months now. Consequently, all players in the industry have enjoyed massive windfalls of cash since that time. However, several other projects are also being launched on various blockchain protocols. Hence, the low transaction volumes in NFTs, which began at the beginning of this month, may suggest that investors are diversifying their investments from NFTs to these other newly launched blockchain protocols.
Between January and March 2021, investors showed strong interest in the DeFi projects and tokens. However, the NFT space embarked on a bullish run to take over from the DeFi sector. But new data suggests that there is a gradual cooling off of NFT trades with rising trades in altcoins and DeFi-related tokens.
Rising Prices Of DeFi Tokens
Tradingview analytics reveal that DeFi perp’s price keeps rising since the start of this month. It rose by almost 140% to a 24-hour high two days ago despite reaching a nadir of about $5,334 on July 21. DeFi perp is FTX exchange’s governance token that consists of the top 25 DeFi-related tokens such as $sol and $sushi.
DeFi perp is almost at the $12,600 level. This level proved crucial to this index’s bullish run till around May 2021. Hence, this proves that there are inflows towards DeFi, which coincides with the decrease in NFT 24-hour trading volumes and low prices of NFT-related projects.
Rise In DeFi Platforms’ Users And Transactions
A new dune analytics data reveals that there is a steady rise in the number of DeFi users. The constant yields, stress-free token staking, and the interest of financial institutions and investors are reasons for this surge in the number of users. While it is possible that some users have more than one address, their numbers are insignificant because DeFi projects offer yields for long-term holdings, and moving assets often require high gas fees.
It is likely that some investors who have made gains from NFTs are now looking to increase their earnings by investing them in DeFi yields. But the newbie investors’ attraction will be DeFi offers high yields without high risk.
Increasing ETH Price And DeFi TVL
Various analytics indicate that ETH has surged by 126% since July 21 and has even rallied by 24% in the last five days. Most DeFi projects are Ethereum-built. Hence, an increase in ETH price will make these DeFi projects more valuable.
Two days ago, DeFi TVL reached an all-time high of almost $172B. While rising DeFi TVL often coincides with rising BTC and ETH prices, this new rise is coming when BTC and ETH prices have not reached the pre-may 2021 prices. Hence, this new DeFi TVL is more of an increase in DeFi token value than a consequence of rising BTC and ETH prices.
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