If anything, the ridiculousness of the recent weeks' saga involving the deliciously named startup protocol SushiSwap shows that not only are market signals alive and well in digital assets, but competition is, too.
The proving ground for most DeFi projects is Ethereum, the second-biggest blockchain, preferred by many developers for its facilitation of "programmable money" through "smart contracts" – bits of programming that stipulate conditions under which transactions occur, as well as any outputs.
The ultimate goal of these DeFi systems is to automate the functions of banks and other financial firms, making them less expensive, more efficient and maybe even fairer in their allocation of capital. Put another way, entrepreneurs are trying to make a buck by building things they hope people will use.
Gambling applications appear to be getting crowded out, but activity has swelled on decentralized lending platforms like Aave and automated, network-based trading systems like Uniswap and Curve. Total transaction volumes reached nearly $25 billion in August, from less than $5 billion a month earlier in the year.
"High Ethereum gas prices have not affected the DeFi ecosystem yet," the publication wrote in its "Dapp Ecosystem Report" for August.
Nor have the elevated transaction fees sowed many doubts in the minds of investors. While prices for ether, the native token of the Ethereum blockchain, have retreated in recent weeks, they've still nearly tripled since the start of the year, to about $367.
John Todaro, director of institutional research for the cryptocurrency-analysis firm TradeBlock, estimated this week in a report that daily fees collected on the Ethereum network have climbed to an average $5 million a day, implying an annual run rate of about $1.5 billion.
"Users have flocked to trading DeFi tokens as they have become the hottest new sector in the space," Todaro wrote.
Shiv Malik, co-founder of the Intergenerational Foundation think tank, wrote Thursday in an op-ed for CoinDesk that a lot of the DeFi activity might just be "token speculation" and "manufactured out of nothing," with "no actual coffee under all that froth."
But based on the recent data, the market appears to be working. And customers are apparently willing to pay.
- Eventually, however, the range play is likely to end with a bullish breakout as the on-chain metrics continue to improve.
- The cryptocurrency's hashrate rose to record highs above 140 exahashes per second earlier this week.
- In addition, there is evidence of dip demand, particularly from small investors.
- The number of "wholecoiners" or addresses holding at least 1 BTC have risen to a new life time high of 823,000 this week, according to data source Glassnode.
- A move above $10,500 would imply an end of the pullback from the August high of $12,476 and signal a revival of the broader uptrend.
- "Moving forward, should price stabilize above $10,500, which coincides with the 0.618 fib, a bullish continuation can be expected," according to analysts at Stack, a provider of cryptocurrency trackers and index funds.
– Omkar Godbole
The latest on the economy and traditional finance
Tweet of the Day
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.