Is this the start of a “DeFi summer”?
On the back of major positive news for Bitcoin, old DeFi coins that many have forgotten existed - such as Bitcoin Cash, Uniswap, Compound, and Aave - have staged a significant rally.
When a group of large caps is rallying, it’s time to look deeper into the relevant narrative - in this case the DeFi narrative - as the capital usually flows from large caps to smaller caps.
Despite encountering resistance in the 31.5 to 32k range, Bitcoin has managed to avoid substantial pullback. Its price closed above the crucial 30k level on the weekly candle and is now consolidating within a sideways range.
A prolonged struggle at a resistance level often paves the way for a short squeeze and a powerful breakout. This could create a cascading effect, leading to a rapid surge in price as short-sellers scramble to cover their positions.
The Bitcoin dominance is still going strong and the altcoin season is far on the horizon. But if Bitcoin breaks the 31.5k level, certain altcoins can outperform, in particular, old DeFi tokens which are considered ‘SEC-compliant’.
A great tool (not many traders know) you can use to gauge the strength of the DeFi narrative is the DEFI/USDT Perpetual Contract chart on Binance. Its price is currently in a downtrend. However, if it can successfully break the trendline and its horizontal resistance, we can expect DeFi tokens to soar.
So what are some low cap DeFi altcoins that can witness a surge in the coming weeks?
1. GMX ($GMX)
GMX is a decentralized spot and derivatives exchange built on Arbitrum and Avalanche that allows trading of top cryptocurrencies with up to 50x leverage.
Its native token GMX is the platform’s utility and governance token. It’s used to pay for trading fees on the exchange, as well as to participate in governance votes. It has a market cap of $458 million and a TVL of $617 million.
GMX has been riding the wave of the perpetual decentralized exchanges narrative which has been gaining traction due to regulatory crackdowns on centralized exchanges.
2. Frax Share ($FXS)
Frax Protocol is the world’s first fractional stablecoin. This means its token FRAX is partially backed by collateral and partially stabilized algorithmically.
The Frax Share token (FXS) is the non-stable, utility token of the protocol. It’s an ERC-20 token used for governance, minting, staking, and redeeming FRAX, as well as providing liquidity incentives.
It has a $400 million market cap and over $1 billion worth of assets locked in its protocol.
Frax Finance has generated attention from investors earlier this year after it became the fourth largest project offering Ethereum liquid staking and is thus part of the LSD narrative.
3. Balancer ($BAL)
Balancer is an automated market maker (AMM) that allows users to create liquidity pools with up to 8 different tokens in any ratio, as well as earn interest by providing liquidity to existing pools.
The BAL token is used to govern the protocol and to pay for gas fees. It has a $233 million market cap with 52% of tokens in circulation. It’s one of the most popular AMMs, with over $1 billion in TVL.
4. Yearn Finance ($YFI)
Yearn Finance is a DeFi protocol that allows users to earn yield on their crypto assets.
The YFI token is used to govern the protocol and to pay for gas fees. It has a market cap of $208 million with 90% of tokens in circulation.
Yearn Finance is one of the most popular DeFi protocols, with $446 million in total value locked (TVL). The protocol has a strong team of developers and a growing user base.
5. Pendle ($PENDLE)
Pendle is a DeFi protocol that allows users to trade future yield for a yield-generating token through its AMM system.
The PENDLE token is used to pay for fees on the platform, as well as to participate in governance votes. It has a market cap of $154 million with 78% of tokens in circulation and a TVL of $119 million.
6. Trader Joe ($JOE)
Trader Joe is a rapidly growing decentralized exchange on the Avalanche blockchain that offers swapping, staking, and yield farming.
JOE is the native token of Trader Joe used for fees, staking, liquidity mining, and governance. It has a market cap of $129 million with 67% of tokens in circulation.
With Trader Joe being one of the most efficient DEXs, its market cap and trading volume have recently exploded. It has over $100 million in assets locked in its protocol.
7. Kwenta ($KWENTA)
Kwenta is a decentralized derivatives trading platform offering perpetual futures and options trading on Optimism with 50x leverage using the power of the Synthetix protocol.
The KWENTA token is used to pay for fees on the platform, as well as to participate in governance votes. It has a market cap of $34 million.
8. Dopex ($DPX)
Dopex is a decentralized options trading platform built on the Ethereum blockchain. The DPX token is used to pay for trading fees on the platform, as well as to participate in governance votes.
The token has a market cap of $29 million with 48% of its tokens in circulation and $23 million of its value locked.
Dopex has a team of skilled developers and a continuously expanding community of users. However, the platform is still under development and has not yet achieved widespread adoption
Zooming Out
With the possibility of a “DeFi summer” around the corner, large-cap old DeFi coins have started to rally. If this trend continues, the capital will likely flow to lower caps covered in this article.
To gauge the strength of the DeFi trend, you can monitor the behavior of large-cap DeFi tokens. If their price tumbles, we can assume that it was just a pump and dump. However, if after a surge the price ranges or only makes a small correction, we can expect more positive momentum.
Another way to measure the DeFi strength is the evolution of the DEFI/USDT pair. If it shows signs of trend reversal, DeFi tokens have a strong chance to skyrocket.
Disclaimer: This content is for educational purposes only and should not be considered as financial or any other advice. Always do your own due diligence before investing your hard-earned money.
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