DeFi Tokens PERP, DYDX Lead Crypto Market Higher, Bitcoin Nears $44K

Supposedly censorship-resistant decentralized finance (DeFi) rails see increased activity in the wake of China’s crypto crackdown.

Sep 27, 2021 at 9:48 a.m. UTC
Updated Sep 27, 2021 at 3:27 p.m. UTC

Native tokens of leading decentralized trading platforms are surging as the biggest centralized exchanges, Binance and Huobi, cut back on China to comply with local regulations.

Messari data shows the PERP token has gained 55% in the past 24 hours to trade at $17. PERP is the utility token facilitating and incentivizing the decentralized governance of the Perpetual Protocol.

Launched in 2018 as “Strike” and later relaunched with a new name and mainnet in December 2020, Perpetual Protocol is a decentralized exchange (DEX) designed for leveraged trading, short positions and low levels of slippage. It uses a virtual automated market maker (vAMM) and collateralization vault to settle trades and enable trading in perpetual contracts, which are futures without expiry.

Coins associated with other decentralized exchanges like Uniswap, SushiSwap, dYdX and Curve have risen between 22% and 35% in the past 24 hours, outperforming crypto leaders bitcoin and ether by a significant margin.

Decentralized finance (DeFi) coins have picked up in the wake of China’s blanket ban on virtual currency-related businesses announced Friday, and Huobi’s decision to stop serving mainland Chinese investors. The crypto market is perhaps pricing an impending shift in trading volumes to the supposedly censorship-resistant DeFi rails from centralized exchanges.

DEXs are seeing a pickup in the activity. For instance, derivatives DEX dYdx has registered a trading volume of more than $4.3 billion in the past 24 hours, surpassing the Nasdaq-listed centralized crypto exchange Coinbase’s $3.7 billion. Perpetual Protocol has facilitated trades worth $258 million so far today, amounting to a near 10-fold rise from Sunday’s tally of $16.16 million, CoinGecko data shows.

According to China journalist Colin Wu, Chinese users will flock to DeFi platforms, bringing solid user growth to MetaMask and dYdX. “All Chinese communities are discussing how to learn DeFi,” Wu tweeted Sunday.

Synergia Capital’s Denis Vinokourov told CoinDesk that the great rotation into all things DeFi has begun, and the sub-sector could see a prolonged bull run. Spartan Capital’s general partner and head of research, Jason Choi, tweeted that overregulation would be a bullish catalyst for DeFi, while ByteTree Asset Management’s Market Insights published last week said “investors should look to DeFi for long-term alpha.”

Bitcoin trims Friday’s loss

While bitcoin has partially erased Friday’s 4.5% slide with a bounce to near $44,000, the cryptocurrency is still trapped in a four-week falling channel.

Bitcoin trapped in a four-week bearish channel (TradingView)

On-chain data continues to paint a bullish picture. “Whales bought the China FUD, adding 80,000 bitcoin to their fat stacks,” crypto analyst Lark Davis noted, referring to large investors.

Blockware Market Intelligence’s market newsletter published Friday also noted the continued accumulation by large investors, adding that the big players tend to buy early on in broader uptrends and begin selling into strength.

That said, the breakout from the bearish channel may remain elusive if the macro picture turns bleak again. Bitcoin fell sharply in the first half of the last week along with S&P 500 on fears that the crisis at the Chinese property giant Evergrande Group may become a systemic problem for global markets.

While equities stabilized in the latter half of the week, China’s property market turmoil may not be over yet. “The Evergrande collapse only shows a dangerous reality in several Chinese sectors: excessive indebtedness without real income or assets to support it,” Daniel Lacalle, chief economist for Tressis SV, said in his opinion post at Mises Institute. “The hope that the government will fix everything contrasts with the magnitude of the financial hole.”

Futures tied to the S&P 500 are currently trading 0.4% higher, signaling a continued risk reset in financial markets.

CORRECTION (Sept. 5 14:18 UTC): Removes reference to Binance no longer serving mainland Chinese investors. Binance is restricting offerings in Singapore.

DISCLOSURE

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.

Omkar Godbole is the senior reporter on CoinDesk's Markets team.