Will Ethereum’s “parabolic” DeFi growth be the main factor of ETH recovery?

Year-to-date, the price of Ethereum is down slightly from $155 to $148 and has been noticeably struggling to recover to 2018 levels.

As said by Adaptive Fund partner Willy Woo, on-chain fundamentals determine the long term trend of a cryptocurrency like Bitcoin and short term price movements are primarily dictated by margin trading platforms such as BitMEX.

The strong growth of the Decentralized Finance (DeFi) market, most of which are built on the Ethereum protocol, could be a fundamental factor that supports the recovery of ETH in the medium to long term.

DeFi on the rise, analysts call it “parabolic” growth

DeFi utilizes smart contracts on a decentralized blockchain network to facilitate financial services that were previously only available through traditional third-party service providers and banks.

It removes middlemen to enable users of cryptocurrencies to issue and receive loans, and to carry out other services.

According to cryptocurrency investor Anton Pagi, the adoption of DeFi has increased significantly throughout the past 11 months, with the usage of Ethereum as collateral crossing 2.5 million.

Total ETH value locked in DeFi has gone parabolic. (Source: Anton Pagi)

Prior to the abrupt rise in the popularity of DeFi, analysts anticipated decentralized applications (DApps) that run on Ethereum to bolster the usage of ETH.

However, in recent months, DApps have seen lagging growth, possibly due to the substantial decline in the valuation of the cryptocurrency market.

As such, investors expect DeFi to be the driving factor behind the medium to long term increase in the on-chain activity of Ethereum, which could also be a key factor in the price trend of ETH.

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