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Strong Fundamentals Not Stopping DeFi Indexes From Crashing

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The 28th of August, 2020 saw Binance Futures launch its DeFi Composite Index. This Index stands as a basket of DeFi tokens that had originally consisted of Aave (LEND), Chainlink (LINK), as well as an array of other significant DeFi tokens. LINK held 27% of the indices, with Aave consisting of 11%. The rest of the tokens held anywhere between 6% and 9.5% of the Index each. The Index gets updated weekly, and now boasts a total of 19 crypto assets.

DeFi Indexes Seeing Large Drops

Everything on paper seems promising, but the DeFi Index for Binance Futures had lost more than half of its all-time high value, going down from its first day numbers of $1,189 to now. As it stands, the basket is changing hands $507 apiece.

After the DeFi bubble of August popped with a bang, various Indexes dedicated to tracking decentralized finance (DeFi) tokens have taken quite the beating. No index has come out of this debacle unbloodied.

On the 15th of September, 2020, TokenSets had launched its own Index, going by the name of “DeFi Pulse Index Set” or DPI. The DPI is composed of the ten largest DeFi protocols, measured by total value locked (TVL), as DeFi Pulse stated. On the first day of each month, this basket is subsequently rebalanced. Each of the token’s sizing is adjusted, doing so in tandem with the relative market cap and circulation of the token in question compared to others in the Index.


DeFi’s Golden Days Are Done, For Now

While TVL of the DeFi space is constantly pushing into new highs, the DPI hasn’t seen that success. In fact, the DPI had lost a third of its total value since launch, dropping down to $90 as opposed to the $130 price it held mid-September.

Various other crypto aggregators are showing that DeFi as a whole is down, as well. Only 16 of the 100 tokens listed as DeFi by CoinMarketCap, the completely unbiased data aggregator, have seen a gain of over 1% this past week.

Prices Down, But TVL Goes Up

Even Messari’s screener that tracks the performance of assets based on Ethereum is also suggesting that the DeFi space has slowed down. The screener has recorded both monthly and weekly losses of around 2%.

Even with the heavy retracements regarding the price of most DeFi tokens, the sector itself is experiencing a growth in fundamentals. The TVL for the DeFi space saw a jump of almost 40% within the span of 30 days. Uniswap, the go-to decentralized exchange, managed to record over $15 billion in trade volumes just a month proper. This stands as even more than Coinbase, the top centralized crypto exchange of the US.

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