This column was co-written by Frank Chaparro, Special Projects Director at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not necessarily reflect those of their employers.
If you’re anything like me, you’ll probably look back on the fun times of DeFi Summer 2020 with sweet nostalgia.
Our industry was still in its infancy and was not hit by the FTX crash and the broader credit crisis that followed.
It was an era of experimentation. Tokens were popping up left and right, “degens” were generating revenue, and developers were tweaking new token economic models. Ponzi schemes and scam coins were being ridiculed, but strangely enough, they were popular.
Looking back on this summer, it seems like many of the past decadence elements have disappeared. If 2021 was DeFi Summer, 2024 will be Bitcoin Bitcoin
-1.06%
Summer. Bitcoin dominance has risen 10% since the start of the year, reaching 59% on August 5th. This is the highest it has been in three years. Meanwhile, DeFi dominance has fallen significantly, recently hitting a three-year low. This cycle, it seems, is not the ones who are going backwards. In some ways, the upcoming election has sucked a lot of oxygen out of crypto and has become part of the cultural zeitgeist. The fact that Polymarket has become a crypto darling this summer speaks volumes about this reality.
A closer look reveals that DeFi is not necessarily dead. Trading volume on decentralized exchanges reached 13.9% in July, the highest ever. Also, the number of new tokens launched on DEXs remained stable throughout the summer after the spring surge, partly due to the Cambrian explosion of memecoins on Solana.
Meanwhile, DEX futures volume was 6.6% of CEX futures volume, with 15 days left in the month.
Obviously the price action is brutal. But it’s brutal for everything. Uniswap’s governance token is down 22% in the past month, Coinbase stock is down 20%. DeFi seems to be dead because everything is a little bit out of sync.
Unlike DeFi Summer, traders now need to pay attention to more than just crypto, as Ostium’s Kaledora pointed out in my DMs earlier this week.
Crypto traders have no choice but to pay attention to the macro economy. It is quickly becoming clear that if you are trading Mimecoin, you need to know what the BoJ is doing (who would have said this a year ago?!).
She’s right. Cryptocurrencies did not fare much better this week, despite global stocks rallying.
For example, Bitcoin has fallen 1% over the past 5 days, while the S&P 500 has risen 3.5%. What’s happening? Market down, Bitcoin down; Market up, Bitcoin down.
Yesterday a trader told me, “There is no bid in crypto.”
It’s cruel.
Disclaimer: The Block is an independent media outlet providing news, research and data. As of November 2023, Foresight Ventures is the largest investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information on the cryptocurrency industry. Below are the current financial disclosures.
© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be legal, tax, investment, financial or other advice.