- Despite 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 yr.
- 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 largest yr thus far in phrases of person progress and adoption in 2021. However, most DeFi blue chip tokens are down over 50% in greenback phrases from the all-time highs they made this yr.
DeFi Blue Chips Lazed in Price Despite Strong Fundamentals
While 2021 was undoubtedly an excellent yr to carry crypto, trying again, plainly most buyers would’ve been higher off holding the 2 largest cryptocurrencies than most of DeFi’s blue chips.
According to information from DeFi Llama, this yr started with roughly $20 billion in complete worth locked throughout decentralized finance protocols; now, on the finish of the yr, that quantity is $250 billion. However, 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, Synthetic, Yearn, and Balancer—is up 300% in greenback phrases this yr. For comparability, the second-largest cryptocurrency in the marketplace, Ethereum, has surged over 540% in the identical interval.
The worth of DPI in USD (blue line) and Ethereum (pink line) phrases. Source: Coingecko
Measured one other method, 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 May. Year-to-date, DPI has underperformed Ethereum by over 110%. Interestingly, DPI has been monitoring the efficiency of your complete cryptocurrency market, which has risen roughly 300% in 2021, with beautiful accuracy.
The largest decentralized trade in crypto, Uniswap, is down over 58% from its all-time highs and has been constantly underperforming Ethereum over a lot of the yr’s course. Aave, Maker, Sushi, Yearn, Synthetix, and Compound are additionally down 58%, 61%, 57%, 65%, and 77% from their all-time highs, respectively.
In the standard equities market, the time period “blue chip” is often used for firms which have reached a family standing in their respective industries. Experienced buyers consider these as companies with sturdy fundamentals which have stood the check of time and are right here to remain. These might 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 biggest decentralized trade for stablecoins on Ethereum, is the one protocol amongst the blue chips that has outperformed Ethereum this yr. It began the yr at $0.62 and is at present 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 buyers.
Disclosure: At the time of writing, the creator of this piece owned ETH, SUSHI, and several other different cryptocurrencies.
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