By | January 1, 2022

Key Takeaways

  • Regardless of ever-stronger fundamentals, DeFi blue chips underperformed Ethereum by over 110%.
  • The DeFi Pulse Index, a benchmark monitoring the efficiency of 18 DeFi blue chips, has retraced over 55% from the all-time excessive worth it made this 12 months.
  • Curve was the one blue chip protocol to outperform Ethereum in 2021, up over 900% year-to-date.

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Decentralized finance noticed its greatest 12 months thus far by way of person progress and adoption in 2021. Nevertheless, most DeFi blue chip tokens are down over 50% in greenback phrases from the all-time highs they made this 12 months.

DeFi Blue Chips Lazed in Worth Regardless of Sturdy Fundamentals

Whereas 2021 was undoubtedly an ideal 12 months to carry crypto, trying again, plainly most traders would’ve been higher off holding the 2 greatest cryptocurrencies than most of DeFi’s blue chips.

In keeping with knowledge from DeFi Llama, this 12 months started with roughly $20 billion in complete worth locked throughout decentralized finance protocols; now, on the finish of the 12 months, that quantity is $250 billion. Nevertheless, regardless of the spectacular progress in utilization and adoption, most DeFi blue chip protocols lagged behind Ethereum and different Layer 1s in worth motion.

For instance, the DeFi Pulse Index (DPI), a benchmark comprising 18 DeFi blue chip tokens on Ethereum—together with Uniswap, Aave, Sushi, Compound, Artificial, Yearn, and Balancer—is up 300% in greenback phrases this 12 months. For comparability, the second-largest cryptocurrency in the marketplace, Ethereum, has surged over 540% in the identical interval.

The value of DPI in USD (blue line) and Ethereum (crimson line) phrases. Supply: Coingecko

Measured one other approach, Ethereum is down solely 20% from its all-time excessive worth of $4,878 in November, whereas the DPI has retracted over 55% from its all-time highs in Could. Yr-to-date, DPI has underperformed Ethereum by over 110%. Apparently, DPI has been monitoring the efficiency of your complete cryptocurrency market, which has risen roughly 300% in 2021, with beautiful accuracy.

The biggest decentralized alternate in crypto, Uniswap, is down over 58% from its all-time highs and has been constantly underperforming Ethereum over many of the 12 months’s course. Aave, Maker, Sushi, Yearn, Synthetix, and Compound are additionally down 58%, 61%, 57%, 65%, and 77% from their all-time highs, respectively.

Within the conventional equities market, the time period “blue chip” is often used for corporations which have reached a family standing of their respective industries. Skilled traders consider these as companies with sturdy fundamentals which have stood the check of time and are right here to remain. These could embody Amazon, Microsoft, Apple, Nike, Coca-Cola, and different main names. The identical is true for the nascent and fast-changing DeFi sector, the place the time period is often reserved just for the house’s oldest, largest, and most respected protocols. 

Surprisingly, regardless of having a precarious token launch in 2020, Curve, the most important decentralized alternate for stablecoins on Ethereum, is the one protocol amongst the blue chips that has outperformed Ethereum this 12 months. It began the 12 months at $0.62 and is at the moment buying and selling at $5.58, marking a year-to-date improve of roughly 900%.

With Web3 on the horizon and sidechain and Layer 2 scaling options like Arbitrum, Optimism, ZK-Sync, and ZK-Starks choosing up in tempo, Ethereum blue chips may have ample alternative to showcase their utility and make a recent case to cryptocurrency traders.

Disclosure: On the time of writing, the writer of this piece owned ETH, SUSHI, and several other different cryptocurrencies.

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