Market Wrap: DeFi Tokens Aave and Uniswap Climb While ETH and BTC Dump

Bitcoin and ether seem to be more sensitive to a fickle global stock market. But that hasn't affected aave and uniswap and other altcoins making huge upward swings, fueled by DeFi hype.

• Aave AAVE$186.18 trading around $567 as of 21:00 UTC (4 p.m. ET). Gaining 27.7% over the previous 24 hours.
• Uniswap UNI$5.4710 trading around $40.69 as of 21:00 UTC (4 p.m. ET). Gaining 7.6% over the previous 24 hours.
• Ether ETH$3,065.72 trading around $4,090 as of 21:00 UTC (4 p.m. ET). Gaining 0.33% over the previous 24 hours.
• Ether’s 24-hour range: $3,955-$4,364 (CoinDesk 20)
• Bitcoin BTC$90,343.20 trading around $54,547 as of 21:00 UTC (4 p.m. ET). Losing 3.8% over the previous 24 hours.
• Bitcoin’s 24-hour range: $53,700-$57,944 (CoinDesk 20)

DeFi tokens are hot

The biggest CoinDesk 20 gainers Wednesday were AAVE, jumping 27% and UNI, up 7%, as of 21:00 UTC (4:00 p.m. ET). Aave is a lending protocol while uniswap is used to exchange tokens in decentralized finance (DeFi), the sector underpinned by the Ethereum blockchain.

“The crypto market is primarily focused on Ethereum and the catapulting DeFi sector right now,” said Nick Mancini, research analyst at crypto sentiment analytics platform Trade the Chain. “The narrative is completely off bitcoin and focused primarily on DeFi, Ethereum and the burgeoning altcoin market.”

It’s no surprise why: As of press time Aave is up fivefold in 2021, with uniswap jumping almost sevenfold so far this year. One fundamental metric Mancini pointed to is total value locked in DeFi. The data aggregator DeFi Pulse reports TVL, which is used to gain profits in return for liquidity, has doubled within three months and is up to $86 billion as of press time.

“DeFi interest is clearly one of the primary drivers behind ether’s recent price rise,” added Mancini.

Ether May options expiry looking conservative

Ether, the second-largest cryptocurrency by market capitalization, was trading around $4,090 as of 21:00 UTC (4:00 p.m. ET), up 0.33% over the prior 24 hours. The asset is below the 10-hour moving average but above the 50-day, a sideways signal for market technicians.

In the ether options market, traders aren’t convinced the asset’s bull run will continue. The probabilities for ETH price at May 21 expiration, according to Skew, have the asset at a 52% chance of being over $4,000, a 32% likelihood over $4,500 and just a 19% chance over $5,000.

“A small pullback seems likely,” noted Mancini on ether’s run-up. “No rally lasts forever.”

Of concern to some traders is that ether’s sky-high valuation will cause fees to make the network unusable. Indeed, on Tuesday, the last day for a full dataset as of press time, Ethereum’s fees hit a high not seen since February, approaching 30,000 ETH in fees for just one day.

Peter Chan, lead quant trader at OneBit Quant, is concerned that in a hot market the fees on decentralized exchanges (DEX) and even centralized exchanges (CEX) are getting out of control. This is due to the strained and overused nature of cryptocurrency networks like Ethereum, which has limited capacity.

“You probably have to use a CEX instead but withdrawal fees are also skyrocketing,” Chan told CoinDesk.

Read More: Ether Touches $500B Market Cap for First Time

Is bitcoin in the 'Twilight Zone'?

The world’s largest cryptocurrency by market capitalization, bitcoin, was down 3.8% Wednesday at press time, at $54,547. The largest cryptocurrency was below the 10-hour moving average and the 50-day, a bearish signal for market technicians.

“The drop in crypto markets coinciding with an ugly close of the U.S. markets can be explained by some correlation trades leading to quick profit-taking in cryptos,” said David Lifchitz, chief investment officer, ExoAlpha. “Bitcoin is back in the middle of its 'Twilight Zone' of $50,000-$60,000.”

Spot bitcoin volumes on major exchanges are down Wednesday, according to Skew. Today’s $1.6 billion in volume across eight major institutional exchanges is 25% lower than the average $2.1 billion the past three months.

“The lengthy consolidation for the price of bitcoin seems completely ordinary for a crypto bull market,” said Sean Rooney, head of research at digital asset manager Valkyrie Investments.

“In Q2 of 2017, bitcoin experienced a similar reaction as [initial coin offerings] took center stage,” added Rooney. “Many outperformed BTC to the upside throughout the summer before BTC resumed a strong uptrend in the fourth quarter.”

Read More: Fairlead’s Stockton Warns of Bitcoin Correction to $42K, Based on Technical Analysis

Other markets

Vitalik Buterin has told dog-themed memecoin creators to bark up another tree.

In a move that captivated the attention of Crypto Twitter on Wednesday, the Ethereum founder re-gifted tokens sent to his public wallet by the creators of Shiba Inu coin (SHIB), dogelon (ELON) and AKITA$0.0₇2780.

Notably, Buterin donated 50 trillion SHIB tokens (worth a nominal $1.2 billion at press time) to the India Covid Relief Fund kicked off by Polygon founder Sandeep Nailwal late last month.

Digital assets on the CoinDesk 20 are mostly in the red Wednesday. The notable winner as of 21:00 UTC (4:00 p.m. ET):

• polkadot (DOT) + 2.5%

Notable losers:

• stellar (XLM) - 8.3%
• yearn finance (YFI) - 6.2%
• eos (EOS) - 5.8%

Read More: Solana Secures $60M Fund to Drive Growth in Emerging Markets

Equities:

• In Japan the Nikkei 225 index closed down 1.6% as a lack of support from the Bank of Japan in the market had investors concerned about the economic outlook.
• Europe’s FTSE 100 ended the day up 0.86% with earnings trumping inflation concerns for traders, leading them to press the buy button on stocks.
• In the United States, the S&P 500 closed in the red 2.1% as recent inflation data proved to investors prices may be overheated, leading to the selling of stocks Wednesday.

Commodities:

• Oil was up 0.56%. Price per barrel of West Texas Intermediate crude: $65.83.
• Gold was in the red 1.1% and at $1,817 as of press time.
• Silver is falling, down 2.3% and changing hands at $26.98.

Treasurys:

• The 10-year U.S. Treasury bond yield climbed Wednesday to 1.695 and in the green 4.3%.

Zach Seward contributed to this report.