Rumors of Altcoin Soar are Exaggerated

Rumors of Altcoin Soar are Exaggerated

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While Bitcoin is steadily moving above $11K, and Ethereum has set a new annual high, market experts draw attention to the overestimated expectations for altcoins from the DeFi sector.

Many experts explain the record rise of ETH by the explosive growth of decentralized finance (DeFi), which is connected with the Ethereum platform. Over the past 3 months, the amount of funds circulating in DeFi protocols has risen 4 times. However, in terms of capitalization, the DeFi market is still smaller than large, but not the leading coins, such as XRP and BCH separately. This is pointed out by Ryan Watkins, the analyst at research firm Messari. Messari is known for its top cryptocurrency news, research, and metrics. Ryan Watkins is skeptical about DeFi, despite their significant progress:

“Despite its rerating over the past couple of months, DeFi is still extremely small in perspective”.

Another research firm, Santiment, has previously reported on some booming projects. In particular, the Compound (COMP), launched on June 15, increased its cost by 400% in the first week, to $352. However, by now the token price has dropped to $135. There were several more reports about the successful development of DeFi projects and the rise of their tokens.

However, Ryan Watkins notes that the DeFi market is only $4.126 billion, which is less than the capitalization of altcoins such as XRP and BCH. And when compared with all traded altcoins, DeFi is “worth an order of magnitude less”. According to Messari, the total capitalization of altcoins excluding ETH is $45.7 billion. Watkins also points out that even many scam projects still outperform the DeFi market. The notorious Dogecoin (DOGE), which has become a meme for useless cryptocurrency, has a capitalization of over $400M and is bigger than most DeFi projects, including Compound, Aave, Synthetix, Kyber and 0x. It was surpassed only by Maker (MKR) with a capitalization of over $570M.

According to Messari, DeFi is now no more than 1.5% of the crypto industry. Therefore, one should not exaggerate the impact of decentralized finance on the market as a whole or the leading cryptocurrencies. Ryan Watkins notes that the DeFi market could rise significantly soon due to the reallocation of capital. However, there is also the opposite opinion.

BlockTower Capital investment manager Ari Paul believes that if Bitcoin continues to rise, it will cause an outflow of capital from altcoins, incl. DeFi, and their inflow to BTC. Investors prefer to invest in altcoins when Bitcoin is “boring”, that is, shows low volatility.