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DeFi boom leaves former altcoin darlings in the dust — But for how long?

The strong performance from DeFi tokens has far eclipsed that of many top-10 altcoins but how long can this trend last?

Republished by Plato

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The rapid popularity and investment growth observed in the Decentralized Finance (DeFi) sector has reflected heavily on the price charts with DeFi and yield-related tokens like Yearn.finance (YFI), Aave (LEND), and others rallying to their all-time highs in 2020. YFI alone has surged 10x since listing.

In fact, most high-profile DeFi-related tokens have outperformed Bitcoin (BTC) and other altcoins by a long stretch. Even governance and infrastructure projects like Chainlink (LINK) and UMA, the latter of which became one of the largest DeFi protocols in September, were eclipsed by DeFi tokens.

As so, with all eyes set on DeFi projects and smart contract platforms like Ethereum (ETH) and Cardano (ADA), a few sectors in the cryptocurrency world appear to have been left behind. Most noticeably, coss-payment platforms like XRP and Stellar (XLM). 

Comparison of profits and losses since December 2018

Comparison of profits and losses since December 2018. Source: CaneIsland Digital Research

Although smart contract platforms like EOS have made modest gains, it has failed to keep up with competitors like Ether, which has been the epicenter of the 2020 DeFi craze (as most DeFi-related tokens are Ethereum ERC20 tokens).

Ripple loses its allure

Among the top-10 coins by market cap XRP has been one of the worst performers in 2020, having recently lost its position as the third biggest altcoin to Tether (USDT). Ripple is currently the fourth biggest cryptocurrency with a market capitalization of roughly $10.6 billion. 

While XRP has risen 20% since the start of 2020 it lags far behind Bitcoin and many other altcoins. In Binance’s Q2 report, the exchange revealed that XRP is the fifth worst-performing crypto on the platform.

There have also been multiple public issues with the project such as the long-lasting class-action lawsuit regarding the marketing and sale of the XRP token. Ripple is also facing a copyright-related lawsuit over the use of the “PayID” brand. Most recently, Santander, one of Ripple’s key bank partners, expressed concerns when it comes to adopting One Pay FX, Ripple’s international payment network.

While things look grim for XRP, there are a few positive signs for the project, such as the growth of On-Demand Liquidity which has processed over $2 billion in transactions since launch and has seen an 11x growth in the first half of 2020, when compared to the first half of 2019. 

There are also plans to move closer to the DeFi space with XRP partner Flare Networks announcing a project that aims to bridge the Ripple and Ethereum blockchains.

Privacy coins were also left behind

Cross-border payments do not seem to be a hot topic in crypto at the moment, given the speculation around DeFi and the growth in stablecoin use. However, there are other pockets that have also failed to perform as well as DeFi or even as well as Bitcoin, including privacy coins.

According to data from Messari, a digital asset data company, Bitcoin has outperformed many of the privacy coins in the market, although popular coins like Monero (XMR) and Zcash (ZEC) have seen modest gains in comparison to Bitcoin in the last 12 months, roughly 5% and 20% respectively. 

The tables will turn when the DeFi bubble pops

While DeFi-related tokens have generated accentuated gains for holders in 2020, the craze has also generated a host of clone and meme projects that are capitalizing on the hype. 

Some tokens in the DeFi sector have taken massive hits to their value, including the SUSHI token, whose main developer market sold a significant number of tokens in what some people believe was an exit scam. Another DeFi meme-token which made media waves recently was Hotdog. The food-themed token lost 99% of its value in the span of 5 minutes, leaving many investors holding worthless bags of hotdogs.

While DeFi has been leaving other sectors in the cryptosphere behind, users should be aware that many of these new projects have very little to offer, being reminiscent of the ICO space in 2017

As so, the DeFi sector may soon follow the same footsteps, especially as the Ethereum blockchain continues to be overwhelmed. If this happens, it is likely that profits will go back to Bitcoin to fiat/stablecoins or to other sectors of crypto that have been left out of the current hype.

On the other hand, DeFi has shown few signs of slowing down anytime soon, especially as high-yield automated strategies continue to be developed

In the future, it’s possible that a portion of these profits will trickle back into Bitcoin and altcoins as investors look for ‘safer’ assets to earn interest in. Thus, it might not be necessary for non-DeFi coins and networks to develop new use cases to entice investors.

Source: https://cointelegraph.com/news/defi-boom-leaves-former-altcoin-darlings-in-the-dust-but-for-how-long

Blockchain

DeFi summer 2.0? ‘Gen 2’ tokens on a tear amid wider market slump

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As some brand-name decentralized finance (DeFi) tokens sputter, a crop of new projects have emerged that are catching strong bids on the back of aggressive yield farming programs, generous airdrops, and significant technical advances. 

It’s a set of outlier projects pushing forward on both price and fundamentals that has led one crypto analyst, eGirl Capital’s mewny, to brand them as DeFi’s “Gen 2.”

Mewny, who in an interview with Cointelegraph pitched eGirl Capital as “an org that takes itself as a very serious joke,” says that Gen 2 tokens have garnered attention due to their well-cultivated communities and clever token distribution models — both of which lead to a “recursive” price-and-sentiment loop. 

“I think in terms of market interest it’s more about seeking novelty and narrative at this stage in the cycle. Fundamental analysis will be more important when the market cools off and utility is the only backstop to valuations. Hot narratives tend to trend around grassroots projects that have carved out a category for themselves in the market,” they said.

While investors might be eager to ape into these fast-rising new tokens, it’s worth asking what the projects are doing, whether they’re sustainable, and if not how much farther they have to run.

Pumpamentals or fundamentals?

The Gen 2 phenomena echoes the “DeFi summer” of last year, filled with “DeFi stimulus check” airdrops, fat farming APYs, and soaring token prices — as well as a harrowing spate of hacks, heists, and rugpulls

However, mewny says that there’s a population of investors that emerged from that period continuously looking for technical progress as opposed to shooting stars. 

“There are less quick “me too” projects in defi. An investor may think that those projects never attracted much liquidity in the first place but they overestimate the wisdom of the market if that’s the case. They did and do pull liquidity, especially from participants who felt priced out or late to the first movers.This has given the floor to legitimate projects that have not stopped building despite the market’s shift in focus. ”

One such Gen 2 riser pulling liquidity is Inverse Finance. After the launch of a yield farming program for a forthcoming synthetic stablecoin protocol, the Inverse Finance DAO narrowly voted to make the INV governance token tradable. As a result, the formerly valueless token airdrop of 80 INV is now priced at over $100,000, likely the most lucrative airdrop in Defi history. 

Another Gen 2 star is Alchemix — one of eGirl Capital’s first announced investments. Alchemix’s protocol also centers on a synthetic stablecoin, alUSD, but generates the stablecoin via collateral deposited into Yearn.Finance’s yield-bearing vaults. The result is a token-based stablecoin loan that pays for itself — a new model that eGirl thinks could become a standard.

“eGirl thinks trading yield-bearing interest will be an important primitive in DeFi. Quantifying and valuing future yield unlocks a lot of usable value that can be reinvested in the market,” they said.

The wider markets appears to agree with eGirl’s thesis, as Alchemix recently announced that the protocol has eclipsed half a billion in total value locked:

Staying power?

By contrast, governance tokens for many of the top names in DeFi, such as Aave and Yearn.Finance, are in the red on a 30-day basis. But even with flagship names stalling out, DeFi’s closely-watched aggregate TVL figure is up on the month, rising over $8.4 billion to $56.8 billion per DeFi Llama — progress carried in part on the back of Gen 2 projects. 

The comparatively wrinkled, desiccated dinosaurs of DeFi may have some signs of life left in them, however. Multiple major projects have significant updates in the works, including Uniswap’s version 3, Sushiswap’s Bentobox lending platform, a liquidity mining proposal working through Aave’s governance process, and Balancer’s version 2.

These developments could mean that DeFi’s “Gen 2” phenomena is simply a temporary, intra-sector rotation, and that the “majors” are soon to roar back. It would be a predictable move in mewny’s view, who says “every defi protocol needs at least 1 bear market to prove technical soundness.”

What’s more, according to mewny some of the signs of market irrationality around both Gen 2 tokens as well as the wider DeFi space — such as triple and even quadruple-digit farming yields — may be gone sooner rather than later.

“I don’t think it’s sustainable for any project in regular market conditions. We are not in regular conditions at the moment. Speculators have propped up potentially unsustainable DeFi protocols for a while now.”

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Source: https://cointelegraph.com/news/defi-summer-2-0-gen-2-tokens-on-a-tear-amid-wider-market-slump

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Fetch.ai (FET) hits a 2-year high after DeFi integration and Bosch partnership

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Artificial intelligence and machine learning are changing the face of commerce, computing and other technologies on a daily basis.

In its most basic form, the information gathered by artificial intelligence is really just data that can be used to make interpretations and blockchains are built for the storage and transmission of data.

Fetch.ai (FET) is a “Cambridge-based artificial intelligence lab” that has the goal of using distributed ledger technology to build a decentralized machine learning platform capable of securely transacting any form of data globally.

FET/USDT 4-hour chart. Source: TradingView

Data from Cointelegraph Markets and TradingView shows that the price of FET has surged 720% since the start of 2021 and this week the altcoin hit a new yearly high at $0.40.

Partnership announcements and DeFi integrations drive adoption

A scroll through the project’s Twitter feed shows that excitement began building at the end of January when Fetch.ai started tweeting about its Mettalex (MTLX) project, which is a decentralized exchange (DEX) for the Fetch.ai ecosystem that specializes in bringing “autonomous and intelligent oracles” to DeFi.

Given that DeFi is another rapidly emerging sector, FET’s inclusion in it was followed by a notable increase in trading volume.

As part of the Mettalex launch, FET tokenholders were given the option to stake their tokens on the platform for 3 months and earn a 10% yield which will be paid in MTLX tokens.

Momentum for the project continued to build throughout February following several high-profile partnerships, most notably a deal with Bosch Group to help the platform launch a multi-purpose blockchain project designed to enable Web 3.0.

While the blockchain project has been in a testnet since October 2020, the upcoming mid-March release appears to be on track based on the following tweet from the Fetch.ai team:

The follow-up release of the project’s first native application in the App store indicates that the expansion of the Fetch.ai ecosystem is just beginning, and record transaction and trading volumes signal that there is growing interest in the AI-focused protocol.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Source: https://cointelegraph.com/news/fetch-ai-fet-hits-a-2-year-high-after-defi-integration-and-bosch-partnership

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What Ethereum killer? On-chain data shows competitor networks are still behind

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Ether (ETH) remains the second-largest cryptocurrency and it absolutely dominates the smart contract industry according to an array of network usage metrics. Even though the network has been overwhelmed by peak activity which is causing median fees to surpass $10, the network effect of its large user and developer base seems to be enough to sustain its position as the second ranked cryptocurrency by market capitalization.

Nevertheless, some key on-chain metrics are beginning to show a potential change in Etheruem’s supremacy, which raises the age old question of whether an “Ethereum killer” will be able to dethrone the top network?

Smart contracts Total Value Locked (TVL) ranking. Source: defillama.com

As shown above, the Ethereum network vastly dominates decentralized applications (dApps). Due to its high gas fees for transactions, when analyzing the number of active addresses, the Ethereum newtork appears to be at a disadvantage to its competitors.

Over the past week, FLOW blockchain’s NBA Top Shot had almost 80,000 active addresses which is five times larger than Ethereum’s Rarible NFT marketplace or even SushiSwap. Thus, the first data to analyze is the daily active addresses number across each blockchain.

Daily active addresses. Source: coinmetrics.io

The chart above shows that Tron (TRX) has recently surpassed Ethereum in daily active addresses, although this metric can be easily inflated. The Tron network has virtually zero fees for simple transactions which creates an unfair comparison.

By measuring effective transactions and transfers,it’s easier to exclude the addresses that are not contributing to the network.

Transactions and transfers, adjusted, USD. Source: coinmetrics.io

By doing this we can see that Tron doesn’t come even close to Ethereum’s numbers, although Cardano’s (ADA) recent price growth has led to a virtual tie between the two.

Oddly enough, the Tron network holds over 14.5 billion of the Tether (USDT) in circulation, which by itself should boost network usage metrics. Meanwhile, Cardano has 90% fewer daily active addresses than Ethereum, yet, both networks handle the same amount of transfers and transactions.

This is especially problematic as Ethereum handles 20 billion Tether tokens and also manages all the transactions of Chainlink (LINK), USD Coin (USDC), Wrapped ETH (WETH), and many others.

ETH, ADA, NEM, NEO, TRX market cap, USD million. Source: cointrader.pro

This data should, at least theoretically, be reflected in the market capitalization. Thus, it makes sense for Ethereum to dominate the ranking as no other network is even close to its decentralized applications.

Moreover, when analyzing the transfer and transactions’ value, Ethereum leads by 50 times if we exclude Cardano’s questionable figures discussed earlier.

For the time being, the data suggest that the four “Ethereum killers” analyzed above are unlikely to “flippen” the Ethereum network anytime soon.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Source: https://cointelegraph.com/news/what-ethereum-killer-on-chain-data-shows-competitor-networks-are-still-behind

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