Index futures for decentralized finance (DeFi) continue to collapse, erasing all gains since late June, as the sector cools off following a wild summer of speculation.
On derivatives exchange FTX, perpetual futures for their DeFi index have fallen nearly 60% from their September high of $3,500, dropping to prices not seen since shortly after the new futures product launched at the end of June.
On Binance, futures for a similar index have plummeted nearly 70% off its Aug. 28 high of $1,190, made the same day when the product started trading. Since its launch, the index has largely only traded downward, closing every week, except for three, at a loss.
A temporary respite may be near, however, offering investors a chance to recover and reevaluate the market, according to Alex Gedevani, analyst at Delphi Digital and former analyst at Barclay’s. The speed of the ongoing sell-off has simply caught many investors “off-guard,” he told CoinDesk.
In Gedevani’s view, the altcoin market is “inching closer” to a capitulation event, at which point the sector can start to “gradually recover.” But a “fresh narrative” is needed to reignite capital inflows to the space, he added.
Bitcoin has been a “black hole sucking up capital from investors looking to cash in on gains from the DeFi summer,” said Jack Purdy, decentralized finance analyst at Messari, in a direct message with CoinDesk. These investors picked bitcoin since it “appears overwhelmingly bullish amid this macroeconomic backdrop,” he said.
Some DeFi projects won’t see a gradual recovery though. Newer projects launched this summer “without clear value propositions will continue to see downside” with investors consolidating into stablecoins or bitcoin, Gedevani said.
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