Make no mistake: Bitcoin investors have made big profits in the past few months — but DeFi traders are raking in even more.
In fact, half of the top 20 DeFi cryptocurrencies by market value have set new record highs this year. Of those 20 tokens, 13 outperformed Bitcoin.
And not by a small margin, either. Seven returned over 1,000% in the past year, while Bitcoin jumped less than 300%.
DeFi is around 2% of crypto
Yearn Finance (YFI) and UMA Protocol performed the best out of DeFi’s current top 20, respectively rising by 3,700% and 3,500%.
Even more impressive, UMA was up more than 8,000% at its peak in September. Yearn almost hit 5,000% around the same time.
Curve (CRV) is the only DeFi token in the current top 20 in the red. CRV trades 87% below its first listings last August, having fallen from $15 to just above $2 in five months.
As for what’s driving the DeFi explosion: a heady mix of hype, momentum, and tiny market caps.
The average market value of DeFi’s top 20 is $950 million — roughly the same as Elon Musk’s favorite, Dogecoin. Overall, DeFi equates to just 2% of the entire crypto market.
With market caps so small, any surge in demand has the potential to send prices skyrocketing. This, combined with the sheer volume of yield farming memes and their influence over newbie investors, can help explain the monstrous returns.
That isn’t to say the tech powering DeFi platforms like Uniswap hasn’t improved. Ethereum’s decentralized exchanges are slowly nearing the efficiency of their spot counterparts, facilitating more trade than ever before.
But Bitcoin and Ethereum still hold enormous influence over the cryptocurrency market. When they drop, altcoins drop too, and often harder.
No doubt, traders will watch closely for which DeFi tokens are left standing after the next big Bitcoin correction — ready to make big profits once again.
This is not investment advice. Don’t invest in something because you read an article on the internet. Always do your own research.