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DeFiNews

Strong Fundamentals not Preventing De-Fi Index Crash

Binance Futures launched its De-Fi Composite Index on the 28th of September, 2020. This Index is essentially a basket of various De-Fi tokens that had originally comprised of Chainlink (LINK), Aave (LEND), along with a variety of other prominent De-Fi tokens. Aave held 11% of the indices whereas 27% belonged to LINK. 6% to 9.5% of the indices were held by the rest of the tokens. Weekly updates are made to the index and it has now expanded to include a total of 19 crypto assets. Even though everything looks good on paper, the fact is that almost half of the all-time high value of Binance Future’s De-Fi Index has been lost. 

The numbers that were recorded on the first day were around $1,189, but as of now, the basket is now changing hands at a value of $507. The August De-Fi bubble had grown rather massive, but it eventually popped and consequently, numerous indexes that were dedicated to De-Fi have taken a rather vigorous beating. There is no index relating to decentralized finance (De-Fi) that has managed to survive this debacle unbloodied. TokenSets had introduced their own index on 15th of September, 2020. It was given the name ‘DeFi Pulse Index Set’ and is known as DPI. 

According to DeFi Pulse, it comprises of ten of the largest decentralized finance (De-Fi) protocols, which are measured on the basis of Total Value Locked (TVL). The basket is rebalanced subsequently on the first day of every month. The size of each of the tokens is adjusted and it is done in tandem with the relative circulation and market capitalization of the token in question, as opposed to others in the index. Even though the TVL of the overall decentralized finance space is constantly increasing, the same success hasn’t been seen in the DPI. 

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As a matter of fact, since its launch, the DPI has actually lost about one-third of its value. In mid-September, it had held a price of $130, but now it has dropped down to $90. A number of other aggregators are showing that there has been a decline in De-Fi as a whole. In this past week, there has been only a 1% gain in just 16 of the total 100 tokens that are listed as De-Fi on the fully unbiased data aggregator, CoinMarketCap. Even Messari’s screener, which is known for tracking the performance of the assets that are based on the Ethereum blockchain, also suggested that the De-Fi space is slowing down. 

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Both weekly and monthly losses have been recorded by the screener of about 2%. Even though the price of most De-Fi tokens seems to be suffering, there is no denying that the sector itself is experiencing a growth in its fundamentals. There was an almost 40% increase in the TVL for the decentralized finance (De-Fi) space in a matter of 30 days. The go-to decentralized exchange, Uniswap recorded a trading volume of more than $15 billion in a month. This is even higher than Coinbase, one of the top centralized exchanges in the US. 

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Bentley Kapoor (India)

Bentley is a cryptocurrency enthusiast and trader, his articles are news and platform review based. His writings are brought to you through his 10 years of experience in the cryptocurrency markets.

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