Market Note: DeFi's Resurgence?

The crypto market as a whole generally moves in lockstep, albeit with some occasional outliers. These outliers can be specific assets or, at times, entire sectors. Price action following the COVID crash saw DeFi outperform pretty much every asset. Several 0-1 DeFi innovations helped generate interest and attract additional capital flows. Since then, DeFi has generally not shown any meaningful strength against the rest of the crypto market. That is, until recently. In the past, DeFi has managed to show glimpses of a potential revival on several occasions, only for them to turn into false positives.

FTX’s collapse was a big wake-up call for the industry while also providing unique opportunities. This is especially true for DeFi. The erosion of trust in CEXs has seemingly reawakened the need for and reiterated the importance of decentralized exchange alternatives. The price action of major DeFi tokens relative to ETH since the FTX collapse event helps visualize the same.

As noted previously, this type of outperformance has not always been the norm for DeFi projects. Since DeFi Summer in 2020, DeFi has largely underperformed ETH throughout the previous bull market as ETH climbed from ~$300 to $4,300 and BTC from ~$10k to $65k. Due to the nature of DeFi token launch dates, price history, etc., we have opted to use Binance’s DEFIPERP as a benchmark for the wider DeFi sector.

There has been chatter surrounding a possible DeFi resurgence over the last several weeks. Previously, any such resurgence talks have been met with a local top in DeFi price action shortly thereafter. However, many truly believe that “this time is different.” Only time will tell if that is the case, but recent banking failures, USDC’s depeg, and major crypto banking partners going under have reiterated the importance of DeFi and the need for decreased reliance on centralized stablecoins. In the meantime, we can look at some