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The spring of 2021 has been dominated by Bitcoin’s rangebound market activity, ETH rallying towards a target price of $3,000, and DeFi surge.
Over 950k Ethereum have been transferred from top centralised exchanges since April 2021. Simultaneously, the proportion of Ethereum in circulation currently trapped in DeFi protocols has increased from 8.5 percent to nearly 10%. This could herald the start of a supply shortage, which could materialise in the summer of 2021.
Although hedge funds take their time getting used to ETH, there has been an increase in interest in DeFi ventures. ETH loans account for a sizable portion of institutions’ loan books; however, investment flows have moved from ETH to DeFi and back again this season.
Furthermore, it is exciting that Ethereum’s creative ideas and scaling solutions are being developed at a rapid pace, particularly given the strong demand for DeFi projects and the large number of unique users. In reality, a number of DeFi projects have been developed to support traders long ETH by boosting trades and resolving scaling problems on the ETH network.
Because of the growing market capitalisation and price rally, projects such as Polygon’s MATIC, a layer 2 solution, have led to the increasing TVL. Top DeFi ventures such as AAVE and CRV are building on the ETH network as a result of Polygon’s partnership with ETH. This is not a problem because ETH has customers and demand as a result of its technological advancements and upgrades.
Furthermore, DeFi teams have extended from ETH to other EVM-compatible chains such as Polygon, and ventures are beginning on BSC before switching to ETH, rather than the other way around.
Based on the performance of the market’s L1, L2 ecosystems, top ventures such as SOL, MATIC, FTM, and AVAX have all led the rally in the Spring of 2021. The scaling up of the ETH network compensates for the pattern reversal in DeFi. Traders are creating steady demand across exchanges and purchasing declines before ETH’s uncertainty is strong enough to sustain a market surge to $3,000 per coin.
Finally, L2 technologies have shielded whales and institutions from excessive fees, which has contributed to ETH’s rising market capitalisation. ETH had a market capitalisation of more than $330 billion at the time of publication, and the stock had remained below $3,000 amid the uncertainty this season. Traders believe that this will change during the summer of 2021.