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Sep 02
2020
August Trading Report: DeFi soars to new heights



Key Takeaways:

  • DeFi continued its parabolic run in August, as the Total Value Locked (TVL) in the ecosystem surpassed $8 billion. 

  • Binance announced the addition of DeFi Composite Index Futures which is a tradable asset that allows users to track and participate in the fast-growing DeFi market.

  • Binance added 17 new derivative contracts in August, bringing the total to 56 futures contracts and 12 leveraged tokens.

  • Binance marked one of its highest single-day altcoin futures volume on August 14th, with over $5.8 billion traded.

  • In August, Binance’s market share in the Altcoin futures space grew as high as 41% and stabilized in the range of 35-40% towards the month-end.

  • Volume on Binance Futures increased by 79% month-on-month to $195 billion, its highest monthly volume since inception.

  • Open interest on Binance crossed $1 billion for the first time since its inception.

Market Overview

Following a resurgence in July, Bitcoin dwindled and strolled past August in a quiet range as prices closed the month with a modest 2.7 percent gain. 

In the prior month, Bitcoin’s upsurge drove prices from $10,000 to $12,000. Since then, the cryptocurrency has settled into a range as traders booked profits following the multi-week breakout. In August, Bitcoin marked its highest point at $12,400 before retracing by 10% to $11,200. 

Despite the quiet month, the bellwether cryptocurrency is still up 63 percent year-to-date and 22 percent on the year-over-year basis.

DeFi Dominance

Meanwhile, the DeFi sector continued its parabolic run in August, as the Total Value Locked (TVL) in the ecosystem surpassed $8 billion. 

Throughout the month, the DeFi uptrend has been unwavering. The Total Value Locked in DeFi jumped over 90% from $4.2 billion to over $8 billion as crypto funds poured in. 

The race for DeFi dominance has grown more intense with Aave (LEND) overtaking Maker (MKR) to the number one position as its total assets surpassed Maker on August 31st. At press time, Aave dominance stood at 17.9% according to DeFi Pulse.

Another big mover in DeFi is Yearn.finance's native governance token, YFI. Its market capitalization has grown 10 fold in just one month from $127 million to over $1.1 billion according to Coinmarketcap. YFI’s exponential growth was mainly attributed to four major factors: Limited supply, strong and active community, reputable development team, and innovative products. A combination of the aforementioned factors and its transparent and decentralized launch garnered the attention of many DeFi enthusiasts since the beginning. 

Catering to the growing DeFi demand, Binance has recently announced the addition of DeFi Composite Index Futures which is a tradable asset under the USDT-margined perpetual futures product line. Defi enthusiasts on Binance can now track and participate in the fast-growing DeFi market.

Since its inception, the DeFi composite index on Binance has attracted interest from DeFi traders with volumes growing by the day. Currently, the index is projecting a highly bullish stance on the market. According to data, more than 90% of the traders continue to hold long positions on DeFi despite the recent volatility. The data reflects investors’ bullish sentiment on the growth of the overall DeFi market.

In August, Binance added the following contracts to further expand its selection of futures products.


Contract (USDT-Margined)

Inception

Leverage

WAVESUSDT

August 12th

50x

MKRUSDT

August 13th

50x

SNXUSDT

August 14th

50x

DOTUSDT

August 22nd

50x

DEFIUSDT

August 28th

50x

YFIUSDT

August 31st

50x


Contract (COIN-Margined)

Inception

Leverage

ETHUSD 1225

August 5th

75x

BTCUSD Perpetual

August 11th

125x

ETHUSD Perpetual

August 18th

75x

LINKUSD Perpetual

August 19th

50x

BNBUSD Perpetual

August 21st

50x

DOTUSD Perpetual

August 25th

50x

ADA Perpetual

August 26th

50x


Contract (COIN-Margined)

Inception

BNBUP

August 6th

BNBDOWN

August 6th

XTZUP

August 7th

XTZDOWN

August 7th

Binance added 17 new derivative contracts in August, bringing the total to 56 futures contracts and 12 leveraged tokens.

DeFi propelled Altcoin futures to a new high

The DeFi boom has caused a surge in trading volume on Altcoin futures contracts across major exchanges. At the beginning of August, aggregated volume marked a new record with over $20 billion in Altcoin volume traded across major exchanges, its highest in recent months.

Binance marked one of its highest single-day altcoin futures volume on August 14th, with over $5.8 billion traded. Daily volume across altcoin futures averaged at $3.4 billion, positioning it as one of the leading exchanges for altcoins. This was shown in Binance’s growing altcoin market share throughout August. The changing altcoin futures landscape has been largely attributed to Binance Futures’ continuous effort in expanding its product range of futures contracts to provide enhanced diversification and better hedging options for its users.

In August, Binance’s market share in the Altcoin futures space grew as high as 41% and stabilized in the range of 35-40% towards the month-end. Increased interest in contracts such as DOT, OMG, WAVES, and LEND has helped catapult Binance’s market share to new heights. 

Altcoins driving volume growth on Binance

Owing to the rise in trading activity, volume on Binance Futures increased by 79% month-on-month to $195 billion, its highest monthly volume since inception. Binance Futures displayed a daily average volume of $6.3 billion.

A significant portion of the volume growth is attributed to Altcoin contracts as traders shift their attention towards Altcoins, in particular, DeFi-related cryptocurrencies. As shown in the chart below, Bitcoin’s volume dominance declined throughout the month, while Altcoin volume grew. 

The Altcoin volume dominance grew from 38% to 68% towards the month-end, averaging at 53% in August. In comparison, the average percentage of Altcoin volume in July was 45%.

Open interest crossed $1 billion for the first time

As Bitcoin surged to $12,000 at the beginning of August, open interest on Binance crossed $1 billion for the first time since its inception. In mid-august, open interest crossed $1 billion again as Bitcoin attempted to break above $12,400. Since then, open interest has stabilized despite the short correction across crypto markets. In fact, the average daily open interest in August has grown to $950 million, a 35% increase vs. $700 million in July

Interestingly, Bitcoin’s open interest remained stable despite the lack of trading activity. In fact, Bitcoin’s open interest in Binance gradually grew towards month-end, this may suggest that traders are positioning long-term directional bets on Bitcoin.


Is Bitcoin in a short-term pullback or trend reversal?

As the US Federal Reserve and its central bank counterparts continue to print money as the solution to every problem, investors have turned their attention to alternative assets like cryptocurrencies and gold.

This inflow of capital has sparked a new trend in the crypto world and spawned new opportunities in Decentralized Finance. Many DeFi projects that provide decentralized financial services, including high-yield interest income and low-interest loans have become prime targets for yield-hungry investors. As a result, prices of DeFi-related tokens and coins have skyrocketed and continue to attract great interest. 

While DeFi-related cryptocurrencies and certain mid-cap altcoins have taken center stage in recent weeks, questions remain unanswered regarding Bitcoin’s direction in the near future. 

At press time, Bitcoin is still holding firmly since its breakout above $10,000 despite a sharp pullback from $11,900 to $11,200. The move follows Bitcoin’s latest attempt to break above the $12,000 resistance, a level which it has so far struggled to hold.

The million-dollar question now, is the recent Bitcoin upheaval a short-term pullback or trend reversal?  

Following its parabolic run in July, many analysts believe that this pullback is a healthy correction that has thrown up buying opportunities for long-term investors. Looking back into history, in the massive 3-month bull market that started in April 2019, there were multiple occasions of short-term corrections that saw prices retraced more than 10%. Therefore, investors should expect occasional corrections as they are necessary course adjustments that keep prices on a broader upward trajectory.

Furthermore, both on-chain data and traders’ sentiment via derivatives remain bullish. This suggests that the market may move either neutral or upwards over the next couple of weeks.

Long-term holders are believers in the future potential of blockchain technology and are often undeterred by price volatility. As such, investors should continue to accumulate undervalued Bitcoins in the interim as a hedge against the current global macro environment. As central banks around the world continue to inject trillions of dollars of stimulus to the financial system, investors today have a strong reason to invest in alternative assets like Bitcoin.