DeFi
DeFi tokens prepare for Ethereum ETF decision: what are the stakes?
- The DeFi sector price chart performance was subdued ahead of the ETH ETF deadline.
- Ethereum sentiment will affect the next price direction for most DeFi tokens.
THE Challenge the story was dragging the coin business for a while. At the time of writing, most DeFi tokens were undergoing price consolidation ahead of the Ethereum [ETH] ETF deadline this week.
As the home and pioneer of DeFi (decentralized finance), Ethereum sentiment can directly affect most DeFi tokens, such as Aave [AAVE], Maker [MKR]Or Uniswap [UNI].
DeFi market cap has fallen below $100 billion. Additionally, trading volume has stabilized over the past few weeks due to the approval odds remained below 25%, according to Polymarket, a prediction platform.
Source: DeFi market capitalization, TradingView
After the mid-April drop, DeFi found itself limited to between $85 billion and $100 billion. This means that most of the blue chip DeFi tokens could have seen sideways movements.
DeFi tokens follow ETH price trend
ETH saw the same price action and fluctuated between $3,300 and $2,900 during this period, meaning DeFi tokens followed the king of altcoins.
Uniswap, coupled with the SEC’s Wells Notice, also returned near January lows, erasing most of the 2024 gains. The DEX token was back in its long-term 2022-2023 range.
Source: UNI/USDT, TradingView
A similar weakened market structure was also present on MKR’s longer-term price charts. The DeFi token has fallen from $4,000 to around $2.8,000 at press time.
Most major blue-chip DeFi tokens showed players being sidelined as they waited for the ETH ETF announcement, as shown by indecision or sideways movement.
However, other DeFi tokens, like AAVE, have recorded a bearish flag pattern, which could expose it to a drop of around 20% if ETH ETFs are rejected.
Source: AAVE/USDT, TradingView
Will ETH Sentiment Hurt DeFi Tokens?
The bearish pressure on some DeFi tokens could be compounded by the decline in trading volume recorded at press time. Data from CoinMarketCap revealed that DeFi trading volume has sunk by more than 10% in the last 24 hours.
Source: Santiment
The negative weighted sentiment on ETH at press time could further limit the upside of DeFi tokens.
With the selection dynamics of ETH sales, as shown by the surge in supply on exchanges, a rejection could lead to massive discounts on several DeFi tokens.
That said, negative sentiment towards ETH could derail the DeFi narrative and its tokens, especially if the SEC rejects Ark/21Shares’ application on May 24.
However, in an unlikely ETF approval scenario, DeFi tokens could face a bullish breakout.