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3 Reasons A Big DeFi Bluechip Rally Is Likely After YFI, AAVE, SUSHI Drop 10%

Decentralized finance (DeFi) bluechips Yearn.finance (YFI), Aave (AAVE), Uniswap (UNI), and SushiSwap (SUSHI) fell steeply in the past week. But as the DeFi market starts to recover, there are three compelling reasons for a sustained rally.

The three reasons for a newfound DeFi uptrend are maturing products, more certainty in Bitcoin’s short-term price cycle, and an increase in risk-on appetite.

Yearn.finance And SushiSwap Are Becoming DeFi Giants As YFI And SUSHI Gain Momentum

In October, the DeFi market saw a capitulation-like correction where major tokens fell by over 50% across the board. 

Despite the pullback, throughout November, protocols like Yearn.finance, SushiSwap, Aave, and Uniswap demonstrated resilience.

Yearn.finance continued to expand its ecosystem through mergers, as seen with its merger with SushiSwap. This strategy has had an immensely positive impact on the price of YFI.

SushiSwap recovered from a controversial phase involving its creator and merged with Yearn.finance. According to CoinMarketCap, SushiSwap has processed $35 million in the last 24 hours, despite the weekend typically posting lower volume. Consequently, the price of SUSHI rallied by 400% since its bottom on November 4.

Danger Zhang, a DeFi analyst, pinpointed Yearn.finance and SushiSwap as examples of how they evolved into DeFi giants despite their difficult beginnings. 

“On the flip side, two projects that started out looking more sketchy: Yearn finance started as a sketchy looking yield farm. It has developed into a Fintech Conglomerate. SushiSwap started as a copy paste fork of Unsiwap. It is now a successful project in its own right. Both of these projects not only have good teams and product market fit They also have: value accrual to the token; transparent development progress,” Zhang said.

The maturation of leading DeFi protocols and the general optimism surrounding these projects contribute to the confidence in the momentum of the DeFi market.

Traders Believe DeFi Could See Lower Correlation With Bitcoin 

Another possible catalyst for DeFi in the short to medium term is the expectation of a lower correlation with Bitcoin.

Traders have said in recent weeks that while traders might sell DeFi tokens when Bitcoin fades, counterparties, such as investment firms and funds, might not sell as a response to BTC’s price movements.

If DeFi tokens begin to see a lower correlation with major cryptocurrencies, including Bitcoin and Ethereum, it could lead to increased investor confidence.

More Certainty In The Bitcoin Price

In the past 72 hours, the Bitcoin price has recovered convincingly from around $17,600 to $19,200.

Bitcoin rebounding above $18,800 was critical to sustain its short-term bullish cycle due to the presence of whale clusters.

Whale clusters appear when whales purchase Bitcoin at a certain price point and do not move their BTC afterwards. The clusters often indicate price points where high-net-worth investors accumulate Bitcoin.

Considering that Bitcoin has started to show signs of a more sustained uptrend, in the near term, the DeFi market could benefit positively from it as a result.

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