DeFi market capitalization as a percentage of global currency market capitalization has fallen to its lowest level in three years.
The DeFi Index tracked by Coingecko showed that DeFi “dominance” hit a 3-year low, falling to 2.81% amid the recent market sell-off.
This is the lowest point before the start of “DeFi Summer” in 2021. The index is mainly composed of DeFi projects on the Ethereum blockchain, but also contains projects from other blockchains like Solana and Base.
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With the introduction of ETFs, which allow institutions to gain exposure to digital assets, DeFi tokens seem to be largely ignored by market participants. Despite the lack of interest, DeFi’s market cap still stands at $70 billion, or about 22% of Ethereum’s market cap at the time of writing.
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According to The Block, the low interest in Defi tokens could be due to several factors, namely the high fully diluted valuations (FDV) of these tokens as well as the current craze for memecoins.
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With a high FDV, investors have to worry about upcoming token releases and inflation rates, which could drive them away. This is quite the opposite of meme coins that can potentially offer multiple returns in a relatively short period of time. However, it is still too early to consider DeFi as an option, given its potential use in the traditional financial sector.
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