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- Ethereum fell 7% on Wednesday after hitting a new high of more than $ 1,430.
- The rise of projects based on decentralized finance, or DeFi, is directly linked to its explosive growth.
- Ethereum users receive more than 4% annual interest, while traditional banks offer less than 0.5%.
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Ethereum fell 8% on Wednesday after breaking above $ 1,430 the day before, hitting a new high for the cryptocurrency that powers the world’s largest smart contract platform.
Its price fell to around $ 1,265 at 11:50 a.m. GMT, retracing the previous day’s record.
Ether, the native cryptocurrency of Ethereum’s blockchain network, has climbed 33% year-to-date to its latest high, just weeks after its crypto cousin Bitcoin hit a new high of nearly $ 42,000.
Ethereum’s gain clearly shows that it has outperformed Bitcoin’s 26% rally so far this year in their respective US dollar pairs. Its positive momentum indicates how projects based on decentralized finance, more commonly referred to as DeFi, are creating a more scalable infrastructure for smart contracts rather than relying on brokers, exchanges or banks.
Cryptocurrency has always been Bitcoin’s lesser-known rival to a mainstream audience, according to Samantha Yap, Founder and CEO of YAP Global. But a growing awareness and understanding of what it is shows that it could be gradually adopted as the DeFi industry grows.
The fact that the world’s second largest cryptocurrency by market cap has hit a new high indicates the start of DeFi “eating up traditional finance,” said Hsuan-Ting, CEO of Furucombo, a lego app from DeFi money. “More and more people adopting it signal a great future for the industry, whether people are using ETH to pay for something or just owning it to capture the value of the network,” he said.
More than $ 25 billion in crypto assets were locked into DeFi apps built on Ethereum in 2020, according to DeFi Pulse. The industry now offers loans, synthetic stocks, interest-bearing assets, exchanges, derivatives, options and credit systems.
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Ethereum users are already able to receive over 4% annual interest, while traditional banks offer less than 0.5% interest, as well as gain exposure to various derivatives that have a market inherently global due to the openness of public blockchain infrastructure, according to Sergey Nazarov, co-founder of the world’s largest DeFi project Chainlink.
“Considering the 10X growth in the size of the DeFi market, the ever higher rates of return on DeFi financial products compared to banks and the inherently global nature of DeFi financial products, as well as the devaluation of traditional assets by high inflation and unchecked money printing, anyone can begin to see that DeFi is where the next flight to safety will take place and is in fact one of the existing forces driving the adoption of cryptocurrencies like Bitcoin and Ethereum today, ”Nazarov said.
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