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- Ethereum plunged 7% on Wednesday after reaching a new record of more than $ 1,430.
- Directly linked to its explosive growth is the emergence of projects based on Decentralized Finance, or DeFi.
- Ethereum users receive more than 4% in annual interest, while traditional banks offer less than 0.5%.
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Ethereum fell 8% on Wednesday after exceeding $ 1,430 the previous day, reaching a new historic record for the cryptocurrency that powers the world’s largest smart contract platform.
Its price dropped to around $ 1,265 at 1150 GMT, returning to the previous day’s record.
Ether, the native cryptocurrency on Ethereum’s blockchain network, shot up 33% in the year to reach its most recent peak, just a few weeks after its cryptographic cousin Bitcoin reached a new record close to $ 42,000.
Ethereum’s gain clearly shows that it has surpassed Bitcoin’s 26% hike so far this year in its respective U.S. dollar pairs. Its positive momentum indicates how decentralized finance-based projects, more commonly known 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 the primary audience, according to Samantha Yap Founder & CEO of YAP Global. But greater awareness and understanding of what it is about shows that it can be gradually adopted as the DeFi industry grows.
The fact that the world’s second largest cryptocurrency in market capitalization has reached a new record indicates the start of DeFi “eating traditional finance”, said Hsuan-Ting, CEO of Furucombo, a DeFi money lego app. “More and more people adopting this signal a great future for the industry, regardless of whether people are using ETH to pay for something or just keep it to capture the value of the network,” he said.
More than $ 25 billion in cryptographic assets have been blocked in DeFi applications built on Ethereum throughout 2020, according to DeFi Pulse. The sector now offers loans, synthetic stocks, interest-earning assets, exchanges, derivatives, options and credit systems.
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Ethereum users can now receive more than 4% annual interest, while traditional banks offer less than 0.5% interest, in addition to gaining exposure to various derivative products that have an inherently global market due to the open public infrastructure of blockchain, according to Sergey Nazarov, co-founder of the world’s largest DeFi project, Chainlink.
“When you consider the 10-fold growth in the size of the DeFi market, the consistently higher rates of return on DeFi’s financial products compared to banks and the inherently global nature of DeFi’s financial products, along with the devaluation of assets through high inflation and uncontrolled money printing, anyone can begin to see that DeFi is where the next flight to security will take place and is in fact one of the existing forces that is driving the adoption of cryptocurrencies like Bitcoin and Ethereum today, “said Nazarov.
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