While Bitcoin has been relatively stagnant over recent days, top coins in the decentralized finance have been undergoing strong corrections. Analysts think that this could result in a strong correction in BTC itself.
Bitcoin Could Become Weak as DeFi Coins Form Weak Trends
While Bitcoin has been relatively stagnant over recent days, top coins in the decentralized finance have been undergoing strong corrections.
Yearn.finance (YFI), widely regarded as the DeFi space’s most prominent project, has slid over 35% from the all-time highs set just weeks ago. The coin now trades at $27,000, far below the highs of $44,000.
This comes as other DeFi coins have also started to move lower.
Coins like Aave’s LEND, Synthetix’s Synthetix Network Token, amongst many others, have also dropped in the past few days as selling pressure mounts after a parabolic rally.
Analysts think that the weakness in DeFi may not bode well for Bitcoin and other top cryptocurrencies. One trader made the following comment on the potential for DeFi to drag down Bitcoin moving forward:
“$YFI tanking a little, used is as a proxy for DEFI in general since it’s the billion+$ cap and OG coin. Tend to think DEFI doing bad is not good for $BTC since it’s a sphere which brought big investments into $Crypto past months. Would keep an eye, on $ETH as well, get a vibe.”
Chart of BTC's price action, ETH's price action, and YFI's price action relative to BTC from analyst SalsaTekila (@SalsaTekila on Twitter). Chart from TradingView.com
No explicit analyses have been done to confirm if Bitcoin and DeFi correlated, but it’s worth noting that
DeFi’s Long-Term Uptrend Still Intact
Fortunately, most analysts remain long-term bullish on decentralized finance.
Qiao Wang, former Messari head of product and a crypto trader, recently commented:
“From an investment point of view, BTC pre-2013 and ETH pre-2015 were once-in-a-lifetime asymmetric bets. DeFi pre-2021 is once-in-a-decade IMO (until proven wrong). If you’ve missed the first two don’t miss the latter.”
DeFi rallying over the long run, assuming all segments of the crypto market are correlated, would likely drive interest in Bitcoin and other top cryptocurrencies.
Chart from TradingView.com Price tags: xbtusd, btcusd, btcusdt Charts from TradingView.com DeFi's Critical Correction Could Drag Bitcoin Lower, Analyst Says