DeFi Season? LINK, AAVE, ZRX and COMP Hit Record Price Highs, Outperforming Bitcoin

An analyst expects DeFi tokens to mimic bitcoin's 2017 bull run this year.

Feb 5, 2021 at 12:24 p.m. UTC
Updated Sep 14, 2021 at 12:07 p.m. UTC

Investors look to be temporarily shifting focus away from bitcoin and toward crypto tokens associated with decentralized finance (DeFi).

In the past 24 hours, DeFi-linked coins such as COMP, AAVE, KNC and ZRX have all leapt to fresh lifetime highs.

Compound's governance token COMP clocked a new record of $500, taking the month-to-date gain to above 40%. The token jumped 130% last month and has risen by 20% in the past 24 hours, according to data provider CryptoCompare.

Oracle provider Chainlink's LINK token is also benefitting from the broad-based rally across DeFi. The token printed a lifetime high of $26.98 during the Asian hours, toppling the previous peak of $25.81 reached on Jan. 25, CoinDesk 20 data shows.

AAVE, the token of the DeFi lending protocol of the same name, also rose 21% to reach record price of $545 and is now trading around $491, per CryptoCompare.

Lastly, the ZRX token from Ethereum-based decentralized exchange 0x, set a lifetime high of $2.50 earlier on Friday and was last seen changing hands near $1.66, representing an 102% gain on a 24-hour basis.

The token has more than doubled in value since Wednesday, surpassing the 2020 peak price of $0.96, according to CoinDesk 20 data.

ZRX token daily chart

Notably, ZRX's 24-hour volume of $1.59 billion is bigger than its market capitalization of $1.38 billion, which is quite unusual. The breakout to new highs looks to have revved up traders' interest in the token.

Most of these coins have chalked up notable gains in recent days in a potential sign that investors are realizing the revenue potential of decentralized exchanges (DEXs) and other DeFi solutions, according to Denis Vinokourov, head of research at the London-based prime brokerage Bequant.

The DeFi coins look undervalued if we compare bitcoin's (BTC) valuation to Uniswap, the biggest DEX by trading volume.

"While Uniswap has a market cap of $6 billion and an annualized revenue of $1.1 billion, bitcoin's market cap or valuation of $700 billion is significantly higher than the annualized [miner] revenue of $1.5 billion," Vinokourov told CoinDesk.

Therefore, the DeFi tokens look to have significant upside potential. William Noble, a chief market technician at Token Metrics, expects such coins to mimic bitcoin's 2017 bull run this year.

Alongside the rally across DeFi, bitcoin remains mostly flat near $37,450 Friday.

Bitcoin looking north

However, the path of least resistance for bitcoin appears to be on the higher side, as demand continues to outstrip supply, as discussed earlier this week. Technical studies are aligned with fundamentals.

Bitcoin daily chart

The cryptocurrency has broken out of a descending channel on the daily chart, indicating scope for a re-test of record highs above $41,900. The market focus may shift back to bitcoin if the cryptocurrency charts a quick move upwards.

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