Blue-Chip DeFi Tokens Defy Bearish Market
Despite the bearish market trend, several tokens associated with top decentralized finance (DeFi) applications are performing well. CurveDAO’s CRV token has surged over 21% in the past week, thanks to the minting of crvUSD, a stablecoin backed by Bitcoin, Ethereum, and ETH liquid staking derivatives as collateral. Maker (MKR), Frax Share (FXS), and Chainlink (LINK) governance tokens have also seen weekly gains between 8% to 9%. The wider DeFi lending and borrowing sector has experienced growth, with most tokens trading positively in the last seven days. This positive movement can be attributed to the use of real-world assets (RWA) and liquid staking tokens as collateral.
Growth of Real-World Assets and Liquid Staking Tokens
Real-world assets (RWAs), such as bonds or corporate debt, that have been tokenized are gaining traction in DeFi. According to DeFiLlama data, total deposits in RWA asset protocols have increased across the board. Additionally, CoinGecko’s report shows a significant growth of 5,870% in total deposits in liquid staking protocols since January 2023. Liquid staking derivatives (LSDs) like Lido’s stETH are being utilized by DeFi lending protocols as collateral. For example, Curve Finance’s crvUSD stablecoin has approximately 53% of its collateral composed of LSDs like Lido’s stETH and Frax staked ETH (frxETH).
Crypto Market Affected by Bond Yields
The broader crypto market faced challenges due to risk-off sentiments in global markets. Bitcoin and Ethereum experienced price drops of 3.2% and 2.6% respectively, primarily due to rising U.S. Treasury yields nearing 2007 highs. The rise in treasury yields is a result of market expectations of an interest rate hike by the U.S. Federal Reserve to combat rising inflation. Higher yields reduce the opportunity cost of investing in risk assets like cryptocurrencies and equities, which have also declined. The total crypto market cap fell 2.4% from $1.112 trillion to $1.084 trillion, losing $27.6 billion over the week.
Crypto Wobbles Amidst Bond Yield Surge
The cryptocurrency market faced challenges as risk-off sentiments affected global markets. Both Bitcoin and Ethereum experienced price drops, with Bitcoin falling by 3.2% and Ethereum by 2.6%. These declines were primarily attributed to the surge in U.S. Treasury yields, which reached levels last seen during the 2007 financial crisis at 4.5%. The increase in yields is driven by market expectations of an upcoming benchmark interest rate hike by the U.S. Federal Reserve due to inflation concerns. Higher yields make investing in risk assets like cryptocurrencies and equities less attractive, leading to declines in both markets. The total crypto market cap decreased by 2.4% to $1.084 trillion, losing $27.6 billion over the week.
Hot Take: DeFi Tokens Thrive Despite Market Challenges
Despite the overall bearish sentiment in the crypto market, blue-chip DeFi tokens have managed to perform well recently. Tokens associated with CurveDAO, Maker, Frax Share, and Chainlink have experienced significant gains over the past week. This positive movement can be attributed to the use of real-world assets and liquid staking tokens as collateral in DeFi lending protocols. On the other hand, the broader crypto market has faced challenges due to rising U.S. Treasury yields and risk-off sentiments. Bitcoin and Ethereum have both seen price drops, and the total crypto market cap has decreased. However, the growth and resilience of DeFi tokens show that decentralized finance continues to thrive amidst market challenges.
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