Decentralised Finance (DeFi) is good, but Bitcoin is king

Decentralised Finance (DeFi) is good, but Bitcoin is king: is it true?

Bitcoin is breaking one all-time high after another, while Decentralised Finance (DeFi) underperformed this week. Still, there were two DeFi projects that eclipsed even Bitcoin.

The crypto market looks back on a historic week and investors in the DeFi sector were also able to set new records. Not only Bitcoin reached a new all-time high. The Total 1K Daily Profit Value Locked indicator, which tracks the total capital locked up in DeFi protocols, has reached a new record high.

DeFi Pulse DeFi Pulse: Total capital locked up in DeFi

Currently, DeFi protocols manage almost 16 billion US dollars, which is roughly equivalent to the current market capitalisation of companies such as PUMA, LG Electronics or the major Italian bank UniCredit. Even though some decentralised finance token prices saw huge price increases this week, the DeFi Pulse Index (DPI) failed to outperform Bitcoin and Ethereum.

Nevertheless, as of press time, the „ETF token“ DPI was up 15.13 per cent over the past seven days.

While Bitcoin has risen over 20 per cent this week, top DeFi names such as YFI, UNI and AAVE have only risen five to ten per cent. But that may probably be mostly because these tokens already saw huge price increases in late November and early December. Decentralised Finance was one of the first sectors to recover from the price lows in the altcoin market in early November.

SushiSwap eclipses bitcoin

Two DeFi tokens actually outperformed Bitcoin. SushiSwap (SUSHI) was one of the big winners in December. In the last seven days alone, the price rose by 25.1 per cent and on a monthly basis SUSHI gained 100.2 per cent. What was the reason for this?

  • Yearn.Finance merges with SushiSwap. The partnership allows the teams behind the two projects to realise synergies. Together they are working on the major project Deriswap – an all-in-one platform for lending, token exchange and derivatives trading.
  • In addition, SUSHI announced the release of its „BentoBox“. This will allow traders to open short and long positions on SushiSwap’s decentralised exchange.
  • Last but not least, co-founder 0xMaki indicated this week that SushiSwap will soon be available on Polkadot. Polkadot is currently one of the fastest growing smart contract platforms.

An old friend reports back

Another decentralised finance winner in the last week is Bancor Network (BNT). Bancor is a decentralised exchange (DEX) that existed before the term DeFi was established. The project has been around since 2017, so it can be considered an old hand of the DeFi space. BNT rose by over 40 per cent last week and is trading at US$1.41 at the time of writing.

Like UniSwap and SushiSwap, Bancor is a decentralised exchange. But the project pursues a different approach and wants to have solved the problem of impermanent loss (IL) with a new method.

In doing so, Bancor does not orientate itself exclusively on the market price but uses price oracles to reduce arbitrage trading that leads to IL. It also uses a new token model to minimise the loss caused by IL. The Head of Growth at Bancor Network, Nate Hindman, explains how the system works in detail in a blog post.

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