With Bitcoin and Stocks Flat, Rally in DeFi Tokens Gets Notice

The cryptocurrency market was mixed on Wednesday: While prices for top assets bitcoin and ether were unusually stable given their volatile history, tokens from decentralized finance (DeFi) took the spotlight.

The CoinDesk Market Index fell by 0.8% over the past 24 hours. Bitcoin (BTC), the largest cryptocurrency by market capitalization, was down 0.8%, changing hands in a range between $19,000 and $19,500. Ether (ETH), the second-largest, followed a similar trajectory, down 0.4% to $1,300 as of press time.

The trajectory was consistent with traditional markets on Wednesday, where the Standard & Poor’s 500 Index slid 0.5% as investors processed a flurry of third-quarter earnings reports.

“Even now there are plenty of bitcoin investors that look to overall market sentiment to guide them, so some of that negativity does end up getting mirrored,” said Sheraz Ahmed, managing partner at StormPartners.

The crypto trading firm QCP Capital noted Wednesday in a post on Telegram that the options market “continues to unwind” trades that had been put on to protect against any swift price decline following last week’s U.S. Consumer Price Index release. The Labor Department’s report, published on Thursday, showed inflation running at a hotter-than-expected pace.

Crypto and traditional markets, rather than taking a deep dive, as many analysts had expected, swerved higher.

According to QCP, there aren’t many crucial economic data points to trade on until the Federal Reserve’s next meeting of its monetary-policy committee, the Federal Open Market Committee, or FOMC.

“With [few] calendar events till the next FOMC in early November, crypto continuing to lag behind equities and skews near flat, protective downside structures are the cheapest levels they have been since June,” QCP wrote. “Skew” refers to the relative balance in the options market between bearish and bullish trades.

The outperformance of DeFi tokens on Wednesday was punctuated by gains from those associated with the Uniswap, Aave and Maker protocols.

The rally in the tokens stands out in crypto markets that otherwise have been moving sideways, said Riyad Carey, a research analyst at crypto data firm Kaiko.

Uniswap’s UNI token rose 3.5% in the past 24 hours and 9.5% in the past seven days as it recently made headlines by raising $165 million in a Polychain Capital-led round.

Aave’s AAVE rose 5.6% and Maker’s MKR was up 1.4% over the past 24 hours, according to CoinMarketCap.

“These can generally be thought of as the gold standards in their respective DeFi categories: decentralized exchange (DEX), lending/borrowing, and decentralized stablecoins,” Carey said in a Twitter DM to CoinDesk.

Looking ahead, investors across the board are eyeing a few lesser economic reports scheduled for release later this week, including jobless claims and existing home sales.

“Any big surprises on these could cause some volatility,” Carey added.