- Ethereum is losing its bridging utility to stablecoins as investors seek stability.
- DeFi is mooning even as Ethereum price continues to struggle while USDT market dominance is growing.
Going back three years, the birth and boom of initial coin offerings (ICOs) were mainly attributed to Ethereum surging prices. Token creators even scammers easily jumped onto the Ethereum token platform with a short term goal of reaping good profits.
Ethereum and Bitcoin became the easiest way for the token holders to cash out. They would first convert to Ether of BTC before ending up with the various fiat currencies such as the US dollar. During this time, either stablecoins were not popularized or simply did not exist at all.
Over the last few weeks, Decentralized Finance (DeFI) tokens have recorded impressive gains. However, Ethereum has continued to struggle like many other cryptocurrencies despite the platform supporting most of the DeFi ecosystem. According to Messari analyst, Ryan Watkins, there is absolutely no correlation between Ethereum and DeFi’s surge. In this case, Ethereum has no reason to rally even as the “DeFi is mooning.”
According to Watkins, the issue of stablecoins ‘killing’ Ethereum’s chance of rallying due to ecosystems such as DeFi was reduced by the emergence of stablecoins. A thesis paper by Qiao Wang also argued that stablecoins “crypto dollars), allow investors to bypass native cryptoassets like ETH for their speculative fervor.” These stablecoins literally “killed the chance for any smart contract platforms to accrue significant monetary nature.”
Some DeFi tokens are currently purchased directly from exchanges such as Coinbase, completely removing Ethereum as the bridge. Some of these tokens are Compound and Balancer. Messari data highlights that some activities such as volumes connected to Ethereum-based products have been falling.
On the other hand, the dominance of assets such as Tether (USDT) continues to surge despite their controversies. However, this is not to say that Ethereum is becoming a lesser useful platform. Watkins says that the platform is transitioning to a utility platform able to support multiple digital economies.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.