Number of Ether Locked in DeFi Hits All-Time High as Underlying Asset Surges

The crypto market is undergoing a bit of a shakeup, especially at the top regions. Although the top 5 crypto assets are trading down, things heated up a bit earlier this week, especially with Bitcoin SV overtaking Bitcoin Cash- the asset from which it was formed- to become the 4th most valuable asset by market cap momentarily. 

However, while BSV had a memorable week, one asset that has managed to hold its own is Ether. The asset is still the top altcoin by a considerable mile, and while its value has been considerably static for a while, it still has a lot of use in the industry. 

Big Moves for DeFi-Locked Ether 

One particular aspect of Ether that seems to be gaining quite a lot of traction so far has been in decentralized finance (DeFi). A lot of DeFi apps that run on the Ethereum blockchain have seen surges in popularity, and as DeFi Pulse showed earlier this week, the total amount of Ether locked in these apps hit an all-time high of 3.1 million ETH (worth about $798 million at the time). 

The amount is a sizable increase from the 2.4 million ETH locked in DeFi apps as of November 2019, and although it signifies a considerable level of trust in the asset itself, several sources also believe that the surge was due to a recent spike in the price of the underlying asset. Ether rose dramatically from $145 to $167 between Monday night and Wednesday, a movement that coincided with the milestone recorded by DeFi-locked Ether tokens.   

On the issue, Mati Greenspan, a popular crypto analyst and founder of investment advisory firm Quantum Economics, said, “It seems that during yesterday’s little bout of crypto volatility, there was a significant increase in the amount of money being deployed in this new area of the market. Presumably, traders were using this new option to increase their capital in order to take advantage of the huge moves in the market.” 

An Attempt at Improving Liquidity 

CoinDesk also reports that the spike could be an attempt by speculators to capitalize on a surge in the market. Speaking with the news source, Robert Leshner of Compound Finance explained that Tuesday was one of the best days for the top 10 cryptocurrencies in a while, adding that the money flowing into DeFi is the result of traders looking to gain more liquidity to allow them to “play the market.”

Compound Finance, which reportedly makes it easier for ETH holders to borrow funds, reported that it saw an increase in its usage on the same day DeFi-locked ETH hit a surge, while collateral saw a 10 percent increase. Also, volumes on decentralized token swapping Dapp Uniswap saw almost 100 percent increases over the previous day.

As Leshner noted, Ether is a primary form of collateral, and that means that holders can do more when its value rises. However, the first step for that will be to use DeFi products to achieve higher liquidity.