What you need to know about DeFi and NFTs as potential investment vehicles

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Ethereum and Bitcoin have long been the market’s most visible initiatives, with both regarded as some of the best investment opportunities available. With fresh investors joining the market, however, new investment alternatives are emerging.

ICOs used to be the big thing. Today, DeFi and NFTs may have merely supplanted them. Surprisingly, their performances make it appear as if DeFi and NFTs have become immune to market performance.

DeFi over Ethereum?

While the bulk of the market is still in the red, DeFi protocols are becoming more popular. Stablecoin-centric DApps are now dominating the ecosystem. While Ethereum experienced a 14.1 percent correction, DeFi TVL (total value locked) across all chains declined by only 5% within the same time period.

This means that, as of late, fluctuations in the value of ETH have had little impact on the DeFi ecosystem.

Ethereum price down by 14.1% | Source: TradingView

However, despite the TVL going past its May ATH, the top 5 protocols by highest TVL were still far from their ATHs at press time. Most notably, AAVE by 49%, Curve (CRV) by 43.7%, Compound (COMP) by 52.86%, MakerDAO (MKR) by 51.57%, and Convex (CVX) by 38.5%.

Their overall market values are significantly lower than their levels from May.

A huge reason for some divergence from DeFi is also due to the rise in NFTs.

Top 5 projects with the highest TVL in DeFi

What impact have NFTs had?

Following the development of Cryptopunks and Apes, NFTs emerged as a key trend in the space. In reality, one of the largest NFT occurrences in history occurred on September 8th.

Over 18k+ addresses competed to mint 7000 NFTs from The Sevens collection. This resulted in the highest recorded mean gas price, exceeding 5k Gwei in less than 10 minutes.

Ethereum mean transaction gas price | Source: Glassnode

Despite the foregoing, the broader NFT market has recently experienced a slump. Indeed, daily volumes have dropped to roughly $100 million.

One reason for this is that top CryptoPunk and Ape (two of the largest NFTs) holders have gone into HODL mode, with fewer trades recently.

Daily NFT volumes | Source: Dune Analytics

That being said, it is still important to remember that NFTs are still illiquid. Their value depends on the hype and as long as that hype stays, NFTs will have solid value.

Once the market interest fades, alas, their value might fall as well. Thus, investors beware.

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