DeFi has had an explosive year in terms of growth and user adoption. Most blue-chip DeFi tokens, however, are more than 50% below the all-time high (ATH) they set this year.
DeFi tokens undercut ETH
While 2021 is sure to be a great year for crypto holdings, in retrospect it looks like investors have seen better returns with the two largest cryptocurrencies (Bitcoin and Ethereum) compared to most DeFi blue chips.
According to DeFi Llama, the Total Locked Value (TVL) for DeFi logs was around $ 20 billion at the beginning of the year and is currently at $ 244.27 billion. Despite the impressive growth in usage and acceptance, most blue-chip DeFi protocols lag behind Ethereum and other Layer-1s in price movement.
According to index DeFi pulse index (DPI), a benchmark that spans 18 blue-chip DeFi tokens on Ethereum – Uniswap, Aave, Sushi, Compound, Synthetic, Yearn, and Balancer – is up 300% this year. In the meantime, ETH has grown by more than 540% in the same period.
DPI in USD (blue line) and Ethereum (red line) | Source: Coinecko
Measured differently, the ETH price was only 20% lower against its ATH from $ 4,878 in November, while the DPI was down more than 55% against its ATH in May. Interestingly, DPI – which tracks the performance of the entire crypto market – grew by around 300% by 2021, with incredible accuracy.
Uniswap’s UNI, the largest decentralized exchange (DEX) in the crypto space, is down more than 58% from its ATH and has consistently trailed Ethereum for most of the year. Aave, Maker, Sushi, Yearn, Synthetix, and Compound are also down 58%, 61%, 57%, 65% and 77%, respectively, from their ATHs.
In the traditional stock market, the term “blue chip” is often used to refer to companies that seasoned investors view as companies with solid fundamentals that have been proven over time and existence. These include Amazon, Microsoft, Apple, Nike, Coca-Cola and other big names. The same is true of the emerging and rapidly changing DeFi sector, where the term is often reserved for only the oldest, largest, and most established protocols in space.
Surprisingly, Curve, the largest DEX for stablecoins on Ethereum, is the only blue chip protocol to outperform Ethereum this year, despite a dismal token start in 2020. It started at $ 0.62 in 2021 and is currently trading at $ 5.66, up around 900% year over year.
Source: TradingView
With the promising Web 3.0 development and sidechain and layer 2 scaling solutions such as Arbitrum, Optimism, ZK-Sync and ZK-Starks, Ethereum blue chips will have many opportunities to present their benefits and create a new use case for crypto To create investors.
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