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Ethereum’s price divergence means this for DeFi blue-chip tokens

  • Ethereum’s price showed a potential decoupling from DeFi tokens.
  • TVL metric, however, showed the contribution of DeFi to the TVL of Ethereum.

Ethereum [ETH] rose to fame by introducing an innovative concept called smart contracts, which revolutionized the world of decentralized finance (DeFi).

However, according to recent reports, the price of ETH, Ethereum’s native cryptocurrency, has been gaining ground on the established tokens of DeFi’s leading projects. This development indicates a potential decoupling between Ethereum and these blue-chip tokens.

Ethereum price decouples from DeFi tokens

According to recent Glassnode data, a notable divergence in price trends between Ethereum’s DeFi tokens and ETH has come to light.

The data revealed that following the “DeFi Summer” in January 2021, DeFi tokens embarked on a more rapid upward trajectory than ETH. However, this surge was short-lived, as a significant drop occurred in May 2021, followed by a continuous decline.

Even during the latter part of the 2021 bull market, DeFi tokens exhibited less responsiveness to positive market movements. This might be due to the market’s growing preference for NFTs during that period.

Source: Glassnode

Furthermore, it was worth noting that the DeFi index failed to surpass its previous all-time high in May. It remained -42% below it, despite ETH prices reaching new record levels in November 2021.

As of January 2023, a breakdown in the correlation between Ethereum and DeFi tokens emerged. It indicated a detachment between the activities surrounding DeFi tokens and the overall ETH market performance thus far this year.

Wallet Addresses decreases

Since March, there has been a significant and rapid decline in new addresses for DeFi tokens. Based on the observed chart, it was seen that only around 600 new wallets holding DeFi tokens were being created daily.

This indicated a continued struggle for DeFi tokens to attract investor attention. Interestingly, this struggle persisted even as ETH prices started to recover during the first quarter of 2023.

Ethereum/Defi new addresses

Source: Glassnode

Additionally, the monthly average of new addresses has consistently remained below the yearly average, except for a notable spike that occurred around the time of the FTX collapse.

However, it is important to note that this spike does not indicate new demand for DeFi tokens. Instead, it was primarily associated with divestment from DeFi tokens as the market perception of risk increased.

Ethereum TVL showcases the decline of Defi 

As of this writing, the Total Value Locked (TVL) of Ethereum per DefiLlama was $26.84 billion. What was notable about the TVL was that Lido, a liquid staking platform was responsible for over 40% of the TVL.

Other DeFi platforms comprised the top five largest TVL contributors to Ethereum’s TVL. A look at the general trend of the TVL showed that it was experiencing regular activities with no significant uptrend or downtrend. 

Read Ethereum (ETH) Price Prediction 2023-24

Weak bullish trend flash in price trend

Examining the daily price trend of Ethereum, it was evident that it was currently experiencing a downtrend. Nevertheless, when considering the overall performance of ETH throughout the year, the price has increased by more than 50% year-to-date.

At the time of writing, ETH was trading at approximately $1,856, reflecting a decline of nearly 1%. While the trend was still technically bullish, it appeared relatively weak. Also, a further drop in price could lead to a shift in the current trend.

ETH/USD price trend

Source: TradingView

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