The ongoing deflation of Bitcoin and the rest of the major digital currencies has finally caught up with the decentralized finance (DeFi) sector, which has been taking a beating over the last few days. DeFi tokens were briefly considered to have been fligh-to-safety assets by investors who like the direction that this technology is taking, but active traders have been cashing in and exiting the market in droves, thus leaving long-term DeFi investors with deep losses.
The biggest winners so far have been traders who are selling their DeFi tokens on Bittrex, where the overall market capitalization dropped by nearly 30%, sending the DeFi tokens and Bitcoin value plunging in a matter of hours. Some of the largest Bitcoin withdrawals have been curiously made from DeFi Bitcoin wallets, which proves that there is still significant value in the sector.
In response, a number of other DeFi traders are looking to sell their tokens and use the proceeds to buy Bitcoin to put back into the exchange platform and hope that the market will rebound as it usually does when opportunistic traders take advantage of volatile conditions. As BTC surged to another record bounce, the market has once again begun to take DeFi down, leading to several other DeFi investors dropping out in droves as well, thus driving the price down.
Some large holders are beginning to panic over the state of the market and have sold off all of their tokens to pay for their losses. Although the loss caused by DeFi has yet to be calculated, not all DeFi tokens are tanking. Over the last couple of weeks, the Curve DeFi token has been surging thanks to its efficient side chain project that improves the functionality of the Ethereum network with lower transaction fees and greater mining opportunities.
It should be noted that the transaction volume on DeFi networks and projects is still very strong, which means that investors should not lose all hope; they just have to remember that volatility will always be a factor in the digital currency markets, and that day traders will always outnumber long-term investors.