The notion of Decentralized Finance (short-DeFi) is inescapably been one of the biggest Buzzwords of the past year. Since the introduction in August 2017, the Defined market from which Nothing could grow in importance – so the current total capitalization of the market is at least 800 million US dollars. While the term Defined is largely associated with Ethereum, could not benefit of the Ethereum course of its growth.
We want to throw in this article a look at potential factors that have led to the price rally in Ethereum failed to materialize so far.
- 1 Ethereum, MakerDAO and the DeFi start
- 2 Delphi Digital, with Insights to the Ethereum course
- 3 Decentralized Finance speaks hardly newcomers
Ethereum, MakerDAO and the DeFi start
The big Hype around the topic of Decentralized Finance began with the Launch of MakerDAO. The idea behind DeFi is to create decentralized applications, which, in turn, services (engl. services) map, we are from the classic financial market in the usual way. For this purpose, the lending of money is one for example.
While the term Defined is often viewed only in the context of Ethereum, you should know that Ethereum has the sole monopoly on DeFi. In short: DeFi-Apps can also be used on other block chains built.
The condition of DeFi & the current ETH price
At the current time, the entire capital, which is deposited in all of the existing DeFi-Apps amounts to about 800 million US dollars. This Maker still dominates with a share of 56%. In total, there are currently 6 DeFi-Apps, in which more than 10 million USD to ETH gelocked.
As already mentioned in the introduction, has seen the DeFi range in recent months and years a significant growth. If we consider, for example, the indicator “Total Value Locked” in US Dollar, we see more than a tripling in the course of the past year.
We say: DeFi grows and the amount in US dollars has in the last year alone tripled. However, this “Hype has not had an impact” on the Ethereum price. So ETH is 88% below its all-time high from January 2018. While the overall picture does not look so bullish, is showing us the 1-year perspective, however, an upward trend. So the Ethereum rate increased in the last 12 months, at least ~60%.
However, we ask ourselves, why the ETH price could not benefit more from DeFi? – The market is still too small? The concept of the hype is completely out of place? How relevant are the DeFi’s really?
Delphi Digital, with Insights to the Ethereum course
As a Basis for our assessment of an article of Longhash and a Report of the analysis company Delphi Digital is used. In this Report the focus is particularly on the size and the (current) influence of DeFi on the Ethereum course. In this case, we can state some interesting aspects:
The current DeFi market is compared to the ICO-Boom small
The first big message is that even if the attention for DeFi becomes larger, and increases, you can’t keep up for a long time with the ICO Hype of 2017. For this purpose, it is said:
It makes sense to take a step back and look at the Dimension of DeFi to look at. How big this is in Relation to all ETH? – Currently about 3 million ETH are in DeFi-Apps gelocked. Also, if this number increase significantly in the last year (approximately 50%) is currently less than 3% of all available ETH (109 million).
In order to make this Dimension even more clearly, compares Delphi Digital, the number of ETH that are currently in DeFi-Apps gelocked, with the number of ETH that were collected during the ICO-hype. The result: in the period from 2016 to mid-2018, were taken alone, 16 million ETH for different ICO projects. This happened at a time in which there was also less ETH. In other words, the Circulating ETH Supply was low.
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ICO-Boom in 2017, has collected 16 million ETH
Thus, we can say that the ICO-Hype, in percentage terms, is much more relevant and “stronger” than the current Trend around DeFi. Furthermore, it is of Delphi Digital:
However, we must be aware of the fact that we compare here is not really ‘apples to Apples’. The 16 million ETH has not been finally gelocked at a fixed time.
The question that arises in this context is how many of the in the framework of ICOs collected ETH, in turn, were on Exchanges. Because the ETH, who went to the Exchanges, in turn, have been part of the available supply. The ETH, which, in turn, remained in the projects, are to be regarded as “locked”. To do this, Delphi says Digital:
By the end of 2017 11.5 million ETH were collected. Of which approximately 30 percent were sent to Exchanges. With these data, it is clear how much influence the ICO-Phase had on the Ethereum rate and its demand. If we consider this in Relation to the DeFi is DeFi ned as a relatively “quiet.”
Decentralized Finance speaks hardly newcomers
Another aspect that is addressed by Delphi Digital, is the proliferation of DeFi. Here, too, can be Parallel to the ICO-Boom drawn. During the hot time of the ICOs a lot of newbies who invested blindly into projects. A bit loosely formulated: also, if you had no idea about the project, were sent in the blind Faith to the fast money, a few ETH to the destination address, in order not to miss just the next big Hype.
Ethereum course user moves by DeFi-hardly
This approach has changed in the last few years (luckily) significantly. Both the Knowledge and the skepticism towards new projects were larger and more investors to be cautious. In this context, the statement from Delphi fits Digital, the field of Decentralized Finance are more likely to be used by people who already have experience in the crypto space. The typical DeFi-Investor to be characterised’ more of the idea to hold the own ETH for a longer period of time and during this Holding period, more from the ‘own money’. To quote the Delphi Digital here:
In simple words none words: the current DeFi-projects attracts new capital. None of the projects have not moved already involved people to buy ETH & thus to generate only a hint of buying pressure.
As a conclusion, the analysis company says that a relevant price, would impact on the Ethereum course only then, if DeFi motivating new investors and people to purchase ETH. The current pricing will see the analysts as a mere result of speculation, and the classic law of supply and demand.
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How do you see the influence of DeFi on the Ethereum course? – Can you understand the reasoning of Delphi, Digital?
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