DeFi “Blue-Chips” Lead Sector Rebound as Smaller Tokens Underperform

The DeFi sector has been on the up and up throughout the past few weeks, with the post-Summer downtrend first reversing earlier in early-November when’s YFI token bottomed out at $7,500 and saw a massive overnight surge up towards $18,000.

From this point forward, the cryptocurrency has been climbing higher every week, showing signs of strength and creating tailwinds for the rest of the market.

YFI wasn’t the only “blue-chip” sector benchmark that reversed its downtrend earlier this month, as many other major tokens rallied in tandem.

This sector-wide movement was bolstered by the strength seen by Bitcoin, Ethereum, and the rest of the cryptocurrency market.

ETH’s rise has been particularly impactful for smaller DeFi assets that gain most of their trading volume from Uniswap, as their 50/50 pools are denominated in Ethereum.

One investor is now noting that although these higher-beta DeFi assets have been widely expected to outperform the rest of the market, they are lagging far behind the supposed “benchmark” tokens within this sector.

DeFi Market Closely Tracks Ethereum’s Price Action 

Ethereum has been guiding the altcoin market as of late, with its price action largely hinging upon Bitcoin.

Currently, ETH’s bulls and bears are battling to hold the cryptocurrency above $600. The selling pressure seen above this price level has been significant and may continue hampering its price action until Bitcoin can break above its all-time highs.

The DeFi perpetual swap basket on FTX – which tracks the performance of a handful of the top sector-specific projects – is up from its monthly lows of $800, with its current price sitting around $2,400.

This, however, marks a massive decline from its recent highs of $6,000 that were set just a couple of weeks ago. This indicates that investors are uncertain about where this fragment of the market will trend next.

It is important to keep in mind that this gives a general indication of the sector’s performance, as the DEFI-PERP’s exact price is influenced by margin use, funding rates, and other metrics.

Blue-Chips Lead Sector’s Rebound

One prominent investor noted in a recent tweet that the DeFi sector is growing more efficient, with the larger projects outperforming their smaller counterparts.

“Wow, incredible divergence among various DeFi tokens, with the blue-chip ones substantially outperforming since the beginning of the month Markets getting more efficient.”

DeFi Ethereum

Image Courtesy of Su Zhu. Source: TradingView.

Where Bitcoin and Ethereum trend in the mid-term will undoubtedly influence the DeFi sector. Until fresh retail money flows into the market and investors grow keen on seeing multipliers, the larger tokens may continue outperforming the smaller ones.

Featured image from Unsplash.
Charts from TradingView.