Top decentralized finance (DeFi) coins have dropped 5-10% over the past 24 hours despite Bitcoin’s move higher. BTC now trades at new year-to-date and multi-year highs at $16,300 and may continue higher as the key supports in the $16,000 region are surpassed.
While Bitcoin is up 3% In the past 24 hours, top DeFi names like Aave, Yearn.finance (YFI), and Synthetix Network Token (SNX) have dropped 5-10% in the past 24 hours.
Ethereum is also down 2% in the past 24 hours, falling from the local highs around $475.
Top DeFi Coins Drop Amid Bitcoin Rally
This drop in the DeFi market comes after an extremely strong move higher in the prices of DeFi coins, where leading names have rallied over 100% since their lows.
Many DeFi coins were overextended in the short term after bouncing so fast from their local lows, resulting in this correction.
But it’s worth noting that the fundamentals of this space are now better than ever.
DeFi Pulse data shows that the amount of capital locked in all DeFi contracts (verified and legitimate) has reached $13 billion for the first time ever. This number is rapidly approaching $14 billion as cryptocurrencies such as Ethereum and Bitcoin, which are used as collateral in DeFi, move higher.
The number of DeFi users has also recently eclipsed 800,000 per some estimates. At the start of the year, this metric was much closer to 100,000.
Analysts think that this drawback may just be temporary and a byproduct of all attention and capital being focused on Bitcoin.
Rally Expected to Continue
The rally is expected to continue as the market seems to be underweight DeFi despite the strong surge already. The theory goes that the market moves against assets that are overweight and moves for assets that are underweight.
Commenting on the prospects of this crypto sector, Qiao Wang, a crypto-asset trader and analyst, recently stated:
“Recap of what I think happened. The mindshare of every informed alt player was on DeFi. But everyone was too afraid to buy on the way down. A game of chicken. Then everyone piled in on first sign of strength. Today many are still in disbelief. But all mindshare is on DeFi. The liquidity in DeFi is simply not big enough to accommodate all of them. Hence the massive high-volume V-shaped recovery.”