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Altcoin season rush: Ethereum and DeFi get in shape for a hot summer

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Altcoin season is in full swing. According to analysts, the Bitcoin dominance index fell below 50% for the first time since 2018. Since the beginning of the year, the indicator has decreased from 71% to 45%. Conversely, the aggregate capitalization of altcoins jumped 420% in just four months. Against the backdrop of slowing growth in Bitcoin, alternative coins continue to update historical highs.

Investors want to make money on those assets that haven’t yet grown as much as Bitcoin has grown. And which still have the potential to renew historical highs.

Among the reasons for the current market situation, analysts named the growing interest in the DeFi space. It expressed itself in the soaring prices of many tokens of decentralized finance projects and the second largest cryptocurrency in terms of capitalization.

Due to the high transaction fees on the Ethereum network, coins of alternative DeFi platforms – Solana and Binance Coin – have become popular. Dogecoin, which has already reached a capitalization of $ 78.8 billion, deserves a separate mention.

Analysts at the research company Messari found that in the first quarter of 2021, the trading volume on all decentralized exchanges increased by 236% and reached $ 217 billion.

DeFi platforms continue to be attractive to investors, and CELO, LSK and QTUM are showing themselves in the smart contract sector. These are attractive tokens in the medium term.

Parallel to altcoin season 2017

Experts drew parallels with the 2017 bull market, in which periods of Bitcoin price consolidation were accompanied by an active rise in altcoin prices. They urged investors to carefully study assets before acquiring them and to avoid tokens of “dubious” projects.

Analysts are convinced that Ethereum’s records are largely driven by the influence of the spot market. Recall that the volume of liquidations of short positions on Ethereum contracts updated highs against the background of the rate growth to $ 3500.

Ethereum Classic – this hard fork of the Ethereum cryptocurrency has also grown. Over the past seven days, Ethereum Classic has risen in price by 201% and reached $ 105.2. An increase for the month was 558%. The digital coin is growing amid rising prices for Ethereum.

Note that projects on Ethereum remain the most popular. If in 2020 the total amount of funds blocked on smart contracts in the Ethereum network was $ 16 billion, by the end of March 2021, according to Messari data, it increased by 200% and amounted to $ 48 billion. However, By this time, the share of DeFi on Ethereum in the total volume had significantly decreased and instead of 80% it was 51% of the total volume of blocked funds.

The main problem for the further development of DeFi projects on the Ethereum network was the growth of transaction fees. In February 2021, they reached values of $ 30-40. However, on May 8th, this value is $ 14.

Therefore, investors began to actively invest in alternative projects on other chains. And there are more than enough of them in DeFi today.

Remark

Despite the great interest of investors in alternative coins, experts recommend keeping a 50% share of Bitcoin in the investment portfolio. Thus, you can protect yourself from sharp fluctuations in the quotations of low-capitalized assets.

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