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Ethereum’s price takes a beating as over $40 billion exits DeFi protocols

Posted: 6 June 2022 5:42 pm

The total capital locked across all Ethereum smart contracts has slipped from AUD$139B to $97B over the last 30 days.

  • While monetary inflows into ETH have recently dropped quite substantially, investors have continued to pour in funds into rival networks such as Solana and Cardano.
  • Ethereum balances across all exchanges have increased by 550,459 ETH since May.
  • ETH's total cap currently stands at AUD$316B (US$228B), with the altcoin possessing a crypto market share of 17%.

Over the last 6 months, Ethereum has dropped more than 50% of its value, with the altcoin struggling to break past the AUD$2,800 (US$2,000) psychological threshold. ETH is currently trading at AUD$2,594.

Ethereum's lacklustre price action continues to be compounded by massive sell-offs. Based on year-to-date (YTD) data, investors withdrew a total of AUD$346M (US$250M) from various ETH-centric investment offerings. This wasn't the case for other cryptocurrencies, with Bitcoin, Solana and Cardano witnessing YTD pour-ins of US$369M, $104M and $9M respectively.

ETH's continued success hinges on a potential decentralised finance (DeFi) boom, with the asset hosting a majority of all decentralised apps (dApps) operating within this space. As of 5 June, the Ethereum network lays claim to approximately 65% of the total capital locked within the DeFi ecosystem. This metric, even though seemingly quite large, has been on the decline. Since 9 May, the capital locked across all ETH-based dApps has dropped from US$100B to $69B.

As the Federal Reserve continues to tighten its monetary policies, analysts like Ilan Solot, partner at multi-strategy hedge fund Tagus Capital, believe that things may not look any better for ETH anytime soon, adding: "The world is in recession, and people need to pay $4.5 per gallon of gas. They'll have less to invest in DeFi or spend on blockchain games."

How to buy Ethereum

Where is ETH headed?

Traders are not too bullish on ETH's prospects, with the altcoin exhibiting the potential to drop as low as AUD$1,850 (US$1,350) in the near term. The altcoin is also witnessing growing balances on exchanges globally, suggesting possible mass liquidations. Since the start of May, ETH reserves across various trading platforms have grown by 550,459 ETH (worth approximately AUD$1.3B).

Ether has continued to fluctuate within a horizontal price range of AUD$2,500–$3,000 for more than a month now, forming what is known as a "descending triangle". It's a bearish indicator that arises during times of a downtrend. It will be interesting to see whether or not the altcoin is able to break out of its ongoing rut anytime soon.

Disclosure: The author owns a range of cryptocurrencies at the time of writing.

Trying to get a handle on the markets? Cut through the noise with our overview of the best cryptos to buy right now, explore some strategies for how to trade crypto or see if there's a better platform for you with our guide to the best crypto exchanges.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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