September 23, 2023

Binance’s DeFi index falls by 60% while Bitcoin eclipses the altcoins

The resurgence of Bitcoin (BTC) continues to undermine the capital of the altcoin markets as other crypto currencies struggle to catch up with BTC.

DeFi struggles while Bitcoin shines

The DeFi Composite Index, initially launched by Binance Futures in late August, is experiencing its second month of stress, trading down from its historical peaks of around USD 1,200 to less than USD 400, a decline of approximately 60%.

In fact, most DeFi tokens have erased 70% to 90% of their earnings since the beginning of September, as Binance’s November 5 report notes. In early October, Cointelegraph reported the already sharp decline in the index to USD 507. Its historical peak had been USD 1.189 on the first trading day at the end of August.

As described in the report, only eight DeFi, AAVE and UNI tokens showed a neutral correlation with Bitcoin during the 45 days to 1 November. Eight other DeFi tokens had a completely negative relationship. Additionally:

„7 out of 13 DeFi tokens had negative correlations with Ethereum (ETH), even though Ethereum drives much of the DeFi ecosystem. The negative correlation of DeFi with BTC and ETH is not a surprise, as the DeFi bubble came to a crashing end in September“.

This week, the decentralised exchange, or DEX, UniSwap has seen a volume of USD 1.8 billion, representing the bulk of DEX trading, with a monthly volume for all DEX combined of approximately USD 2.8 billion.

BTC’s market capitalisation, trade volume dominance also increases

Meanwhile, Bitcoin’s market capitalisation dominance has increased sharply in recent weeks with the price now rising by almost 10% since early September.

Binance notes that there is also a significant increase in Bitcoin Fortune trading volume dominance, arguing that it has been „suppressed in previous months“ due to media concerns about the „alternative season“.

However, by October, market sentiment had „completely reversed“ in favour of Bitcoin and operators switched to BTC as the altcoins sector declined.

However, Binance takes the line that the underlying fundamentals of the DeFi market are sound. Even despite these gloomy setbacks across the board, the total blocked value in the DeFi sector has remained above USD 11 billion over the past 30 days.