As Bitcoin rallies to its yearly highs, DeFi tokens continue plummeting. Data shows that trading volume from decentralized exchanges are dropping at a significant level while Bitcoin continues moving towards the upwards trend.
DeFi Could Fall Further if Bitcoin Rally Continues
The co-founder of Market Science shared an interesting analogy on the negative correlations of Bitcoin and DeFi, from over 45 days, saying:
“Correlations between $BTC, $ETH, and DeFi: interesting to see how consistent the negative correlation between BTC and DeFi is. Data is from the past 45 days, since the launch of UNI.”
Interesting to see how consistent the negative correlation between BTC and DeFi is.
— ₿itDealer (@Bitdealer_) October 31, 2020
The data reveals that Bitcoin price rally led DeFi tokens to drop rapidly and could fall more in the coming times, should Bitcoin continue its rally.
Meanwhile, researchers at the Santiment have shared their own analysis of why bitcoin might continue its rally.
💲➡️🪙 As #Bitcoin has exploded to a peak of over $14,000 today, we can see how the $USDT supply (and even #Tether's subtle price variations) have changed throughout October. #Tether's supply on exchanges has shrunk by -2.2% this month as $BTC has risen. https://t.co/7pFwO3oznK pic.twitter.com/45DMVQKV8N
— Santiment (@santimentfeed) October 31, 2020
According to them, the declining supply of Tether puts forwards more capital inflows into Bitcoins, saying:
“As Bitcoin has exploded to a peak of over $14,000 today, we can see how the $USDT supply (and even #Tether’s subtle price variations) have changed throughout October. #Tether’s supply on exchanges has shrunk by -2.2% this month as $BTC has risen.”
Investors Shifting to BTC Due to Decreased DEX Volumes
The rise of stablecoins into the Bitcoin market has also led to a negative futures rate, only causing its price to increase further.
Meanwhile, decreased DEX volumes have caused investors’ attention to shift towards Bitcoins as seen by the increased trading volumes of Bitcoin derivatives products.
The largest cryptocurrency by market capitalization has been up by 24% since this month. The recent investment of Bitcoins from institutional and corporate players such as Square, PayPal, Grayscale, MicroStrategy might also lead the price of BTC to increase further in the coming times. PayPal’s recent announcement on adding Bitcoins to its platform, caused BTC to rally nearly to 10%.