The cryptocurrency market experienced massive volatility last month when the 6-month bull market for digital currencies ended with the last bitcoin (BTC) deviation of $ 12,000.
Meanwhile, the DeFi sector has witnessed impressive growth with the total value of banned DeFi platforms exceeding $ 10 billion, however there is a slight correction in the sector at the time of writing.
When Bitcoin (BTC) and Ether (ETH) began to decline in late September, DeFi tokens broke at the same time, according to a Quintelegra report. Then the sudden diagnosis of COVID-19 by US President Donald Trump put further pressure on the DeFi market.
Regardless, the Maker (MKR), Uniswap (UNI), Yearn.finance (YFI) tokens and other Decentralized Finance (DeFi) tokens have decreased in value over the past two weeks. However, several data show that the underlying basis for the most important DeFi tokens is still going strong.
In particular, Maker, Uniswap, and Aave’s revenue increased 130-440% in the last 30 days due to a significant drop in the prices of their base tokens.
DeFi core tokens can be resold
It is difficult to measure the value of DeFi’s projects based on static calculations because each differs structurally, but the most common calculations are revenue and total value of insurance (TVL).
Revenue measures the amount of capital the DeFi project generates from its products, and is an effective calculation for gauging overall user needs and market sentiment.
TVL shows how much capital is reserved in the DeFi protocol, and usually shows investor confidence along with the project’s market share. TVL is also weakly correlated with liquidity and volume in the different interest rate groups.
As shown in the graph above, revenue from major DeFi protocols has increased in the past 30 days. However, the price for DeFi base tokens has decreased by 20% to 82%. For example, Maker is down 24% in the past 30 days, but revenue has increased 449% in the same period.
If TVL for the project is stable and revenues grow, it is likely that a dangerous drop in prices will mean extreme caution in the DeFi market. Likewise, Uniswap and Aave recorded a steep drop in prices, while both recorded revenue increases of more than 235%.
Geoff Dorman, Arca’s chief investment officer, explained that fundamentals don’t necessarily move with price. Referring to the change in revenue from DeFi protocols versus token prices, Dorman wrote:
“Price and fundamentals don’t always move the way you think. DeFi is a good example for this month. According to Messari and Token Terminal, here are 30-day revenue changes for some DeFi protocols compared to 30-day price changes.”
In the medium term, Dorman emphasized that this is the “ideal” scheme for value investors. It shows the core projects that offset the recent drop in prices as a result of the correction in the cryptocurrency market. He don:
“Not all tokens are created equal. Some have no economic value regardless of income, while others accumulate direct value as profits increase. This is the ideal place for value investors – the sector is dumped en masse, but there will be winners and losers on the long term. ”
Daily users of TVL and DEX continue to grow
Data on the chain from Digital Asset Data shows that TVL in the DeFi market is relatively unchanged. While most DeFi tokens are down 30-50%, TVL is still over $ 10 billion.
For example, at Yearn.finance, its YFI token is down 44% in five days, and the digital asset is currently 56% below the top.
Despite the astonishing decline, investors and analysts remain optimistic about the project, as the Yearn.finance team announced earlier this week that they plan to launch new stablecoin vaults.
More evidence that the token price is not a reflection of the viability of the project comes from Defipulse data showing that Yearn.finance has a TVL of around $ 700 million, a figure close to TVL in August when the price was much higher.