Decentralized finance and the many platforms offering investment services have been the latest trend in the cryptocurrency sector for several months now and this has resulted in investors making impressive returns on some of the major DeFi tokens such as Uniswap (UNI) and AAVE.
Rapidly rising prices and 1,000% annual percentage return on staked tokens sparked investor euphoria when the market was bullish, but the recent selling pressure experienced when Bitcoin’s price fell below $ 45,000 shows that the best performing tokens are often the quickest to fall as traders rush to close their positions and secure their profits.
On February 22, the price of Bitcoin (BTC) entered a sharp corrective phase that saw major digital assets decline by more than 20% from their all-time high of $ 58.274. When this occurred, most altcoins also saw double-digit corrections and DeFi tokens like PancakeSwap (CAKE) fell as much as 55%.
Total value locked in DeFi shows resistance
The Total Value Locked (TVL) on DeFi platforms was also affected when Bitcoin and altcoins were corrected. Data from DeFi Llama shows that the combined TVL of all DeFi platforms fell from $ 64.89 billion to $ 54.22 billion on February 24. Cointelegraph also reported that this week’s correction led to the second-largest day of DeFi loan payoffs in history.
The decline in TVL is the result of falling token values rather than protocol exits, indicating that token holders remain committed to the continued expansion of decentralized finance and that current returns are still in place. incentivizing investors to continue participating in the niche.
Market analysis indicates that despite the recent $ 5.8 billion selloff of Bitcoin and altcoins, the bulls remain bullish and see this price pullback as a sign of a healthy market.
The same goes for the DeFi sector, which has been in a strong uptrend since the beginning of the year. Increased volume from decentralized exchanges, as well as a rising TVL, show that decentralized finance is still in the early stages of growth, and although pullbacks are expected, the overall trend is positive as institutional and retail investors gain. increasing exposure to this emerging asset class.