On Nov. 29, sentiment in the cryptocurrency market rose marginally. When Bitcoin (BTC) returned above the $57,000 support. Boosting the index higher into the “fear” zone. Reversing a previous fall into the “severe fear” zone on the Crypto Fear and Greed Index.
Despite the broad “fear” and “extreme fear” sensations that have been ruling the market since the index began to decrease on Nov. 16, certain sub-sectors of the cryptocurrency market, especially metaverse-related projects and gaming protocols, have seen breakouts to new all-time highs.
Because of the rapid increases seen in these projects, some are afraid that if traders take profits and wait for more stable price levels, the metaverse and gaming industries may experience a significant drop in the near future. Many individuals are guessing which market sector would experience good momentum and price increases next.
A closer look at the data reveals that the decentralised finance (DeFi) segment of the market has been slowly gaining traction in recent months. With total value locked in DeFi reaching a new all-time high of $276.92 billion on Nov. 9 and presently sitting at $265.74 billion.
The increase in TVL occurs as new protocols, like Fantom and layer-two solutions like Arbitrum, continue to develop on Ethereum (ETH) compatible networks, allowing users to execute transactions in a lower-fee environment.
DEX activity increases
Another sign that DeFi activity is picking up is the increase in trading volume on decentralised exchanges (DEXs) like Uniswap and SushiSwap, which have experienced a steady increase in activity since the market bottomed in mid-July.
As seen in the graph above, the volume traded on the top DEXs has consistently recovered to levels similar to those observed during the bull market in the first half of 2021.
One of the most important developments has been the addition of activity from dYdX. A decentralised layer-two perpetuals and futures market that startled early adopters back in September. When it airdropped its new governance token to users who had previously participated with the protocol.
Since its establishment, dYdX has established itself as the go-to platform for decentralised options trading in the crypto industry. With trading volume surpassing that of Coinbase, the largest US-based cryptocurrency exchange.
One final piece of evidence that DeFi activity is on the rise, as is underlying pessimism about where the sector is headed, is the borrowed volume on the largest lending platforms, which has already reached an all-time high of $35 billion.
In conclusion, this means that crypto hodlers are securing their tokens as collateral for loans. That may be used for crypto and DeFi-related activities. And that many are anticipating the bull market to continue as the ecosystem prepares to finish out 2021 and kick-off 2022 with a bang.
The total market capitalization of all cryptocurrencies is currently $2.63 trillion, with Bitcoin commanding 42.1% of the market.