An important part of maintaining investment profits is to understand when assets or departments show signs of exhaustion and when to rotate departments.
This is especially important in the fast-growing cryptocurrency market, which can instantly change direction and turn cryptocurrency millionaires into frustrated bag holders.
Most investors know that the field of non-fungible tokens (NFT) has been hot since July, and CryptoPunks, Mutant Ape Yacht Club and pet EtherRock NFTs Get the sum of six digits and seven digits, And the top NFT market OpenSea Exceed Total sales are 4 billion U.S. dollars. Although the fanaticism is exciting, many new projects have been launched on various blockchain networks, and the recent decline in transaction volume may indicate that investors are seeking to move to different areas.
In the first quarter of 2021, the Decentralized Finance (DeFi) protocol and its related tokens became the focus of investors’ attention, but as the NFT market experienced its first bull market, the industry cooled in March. It now appears that the trend has begun to change, and the profits from NFT transactions may re-enter the altcoin and DeFi markets.
The following five signs indicate that capital may be shifting from NFT to DeFi.
Large-cap and small-cap DeFi token rally
DeFi Perp is an index token on the FTX cryptocurrency exchange, including a basket of 25 top DeFi-related cryptocurrencies, including Maker (MKR), Polkadot’s DOT, Solana (SOL), Curve DAO Token (CRV) , Uniswap (UNI) and SushiSwap (SUSHI).
Data from Transaction view It shows that the price of DeFi Perp has been rising since it bottomed and rebounded to US$5,331 on July 20, and has since risen by 138% to a daily high of US$12,771 on September 2.
The price of DeFi Perp soared to the support and resistance levels of $12,500, which proved to be an important level during the February-May 2021 rally, indicating that funds are beginning to flow back into the DeFi ecosystem, just like the daily NFT Both the trading volume and the price floor are falling.
NFT prices are cooling
Since the rapidly rising NFT price has always been the main feature that has attracted public attention, it is also a red flag and a good indicator for judging the overall health of the industry. As shown in the figure below, the chart tracks the daily average price lower limit of NFTs sold in the market, and the average price lower limit reaches 1.02 Ether (Ethereum) On August 29th, it fell back to 0.5 ETH since then.
The fact that NFTs are sold at lower prices or new high-volume items are sold at lower prices may indicate that the market may become saturated and momentum is beginning to weaken.
The surge in active users and transactions on the DeFi platform
Another sign of the continued growth of the DeFi ecosystem is the steady increase in the number of DeFi users over time, as shown in the figure below from Dune Analytics.
New users interacting with the protocol may be attracted by stable income and easy token collateral. Cointelegraph reported that investors in traditional finance are also deeply interested in the services provided by DeFi.
Although this indicator tracks the number of unique wallet addresses that interact with the DeFi protocol, and some users may have multiple addresses, the situation has recently become more complicated. The long-term nature of earning income in DeFi by staking, providing liquidity or locking tokens on the protocol can be said to cause users to switch between multiple wallets and pay high gas fees to continuously move the number of assets down.
The continuous entry of new users into the DeFi field may indicate that some people who profit from NFTs are now seeking to lock in profits and earn revenue, while newcomers to the market are attracted by its low-risk opportunities.
$4,000 in ETH marks the rotation
Another possible herald of the industry’s shift to DeFi development is the rise in the price of ether.
Data from Cointelegraph Markets Pro with Transaction view Shows that the price of Ether has risen by 125% since hitting a low of US$1,706 on July 20, and the most recent rise of 23%, pushing its price from US$3,134 on August 30 to a high of US$4,029 on September 3 .
Since most of the top DeFi protocols are located on Ethereum, the top altcoins are one of the main assets in the DeFi ecosystem and are widely used to mortgage and purchase other tokens.
DeFi TVL hits a record high
The last indicator that the sector is moving to DeFi is the total locked value (TVL) on all DeFi agreements. On September 2, this figure reached a record high of US$171.5 billion.
TVL’s previous surge is largely due to the rise in the prices of Bitcoin and Ether, but the current push is because the trading prices of these two tokens are far below the highs of 2021, which shows that TVL’s rise is even greater. Increased use of DeFi tokens and stablecoins in many places.
Although the NFT boom may not be over, multiple data points indicate that the bullish momentum has been exhausted, and the current rise in altcoin and DeFi prices indicates that the rotation is in its early stages.
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