Positive start of the Index trading.
The first trading week of the pair DeFi/USDT on the Binance exchange ended with the price fall to $746.5. The beginning of trading began with a positive growing dynamics. Within two days, buyers managed to raise the Index price by 11%, reaching the mark $1120.
LINK gave the main impetus to the Index growth, which grew by 20% in two days. Given that LINK accounted for almost a third of the DeFi Index weight last week, its price movement has a significant impact on pricing. Along with LINK, other coins included in the Defi Index also showed positive trading dynamics. However, the average growth of these coins was 8%.
The DeFi Index fell by 35% for the week.
At the beginning of the new month, after an unsuccessful attempt to break $1120, the DeFi Index sharply began to fall. Within 2 days, sellers managed to update the low, lowering the price by 35%.
The DeFi coins fall began faster than the fall of BTC and the entire crypto market. Whereas, BTC showed the price growth almost by 4% on 1 September, the DeFi Index was in consolidation. The exceptions were BAND, COMP and MKR, showing growth on 1 September. Although in the end, during the BTC fall by 17%, the DeFi Index stopped only at 35%. MKR performed best during the fall, falling by 22%. KAVA and SXP set a record and fell by 45%. Insufficient liquidity of Defi coins is due to the extremely fast growth rate of this space.
Tokens and weight change in the DeFi Index.
Yesterday Binance added 3 more tokens which will affect the DeFi Index price formation. They were YFI (Yearn.Finance), BAL (Balancer) and CRV (Curve Finance). The total amount of added projects locked funds is 2.62 billion dollars, which is 30% of all locked money according to Defi Pulse.
Therefore, the inclusion of these tokens should have a positive effect on the formation the Index fair price. With the new tokens, the weight of the impact on the Index was redistributed:
The table shows the impact of Compaund Finance increased (doubled), and the role of LINK decreased from 28% to 22%.
This week, investors who sincerely believed in the DeFi projects felt significant discomfort and experienced their investments in a locally falling market. At the moment, the current fall does not look like a global trend reversal. The current correction of the DeFi market has shown us how high the volatility awaits investors in the future and, accordingly, the risks of lending and collateral of their loans. Therefore, during the next week we expect the correction end and the beginning of a new wave of growth of DeFi projects and their tokens.
Charts courtesy of Binance