DeFi struggles as Bitcoin shines
The DeFi Composite Index, first launched by Binance Futures in late August, is seeing its second month of strain, trading down from its all-time highs of close to $1,200 to under $400, a decline of roughly 60%.
In fact, most DeFi tokens have erased 70% to 90% of their gains since early September, as Binance’s Nov. 5 report notes. In early October, Cointelegraph reported on the index’s already stark decline to $507. Its all-time high had been $1,189 on the first day of trading in late August.
As the report outlines, only eight DeFi tokens, AAVE and UNI, showed a neutral correlation with Bitcoin over the 45 days running up to Nov. 1. Eight other DeFi tokens had a wholly negative relationship. In addition:
“7 of 13 DeFi tokens had negative correlations with Ethereum (ETH), despite Ethereum powering much of the DeFi ecosystem. DeFi’s negative correlation with BTC and ETH is no surprise as the DeFi bubble came to a crashing end in September.”
This week, the decentralized exchange, or DEX, UniSwap has seen $1.8 billion in volume, accounting for the lion's share of DEX trading, with monthly volume for all DEXs combined standing at roughly $2.8 billion.
BTC market cap, trading volume dominance also rising
Bitcoin market cap dominance, meanwhile, has climbed steeply in recent weeks with the rising price, now being up nearly 10% since early September.
Binance notes that there is a significant uptick in Bitcoin trading volume dominance as well, arguing that it has been "suppressed in prior months" due to the media's preoccupation with "alt-season."
By October, however, the market sentiment “completely reversed” in Bitcoin’s favor with traders shifting to BTC as the altcoin sector declines.
Binance nonetheless takes the line that the underlying fundamentals of the DeFi market are solid. Even despite these bleak retracements across the board, the total value locked in the DeFi sector has kept above $11 billion in the past 30 days.