Why one analyst believes DeFi’s collapse will fuel a historic Ethereum rally

Ethereum has caused quite a stir across the crypto sphere in recent days, largely due to the explosion in the popularity of decentralized finance (DeFi).

Much of this popularity was driven by an emerging trend called “yield farming,” where users can leverage various protocols to receive massive payouts, some of which are as high as 200% annual interest.

This trend has resulted in many DeFi-related tokens seeing massive upward trends, with the COMP gaining several hundred percent while many other tokens also saw parabolic rallies.

However, analysts are now realizing that this DeFi bull market could soon come to a hard end and potentially provide fuel for a major Ethereum rally.

One analyst even notes that this could spark a new bull run by Ethereum, breaking its multi-year downcycle and igniting the flames that will fuel its next massive uptrend.

Ethereum remains stable as the DeFi sector sees explosive growth

The price development of Ethereum in the last few days and weeks has been closely correlated with that of Bitcoin and the aggregated crypto market.

This stability has come about despite the fact that ETH is fundamentally strong due to its massive number of users and its usefulness.

At the time of writing, Ethereum is trading over 2% at its current price of $ 238. That slight increase was seen today as Bitcoin attempts to break above $ 9,500.

Some investors have scratched their heads as to why ETH price developments have not been affected by the massive growth of the DeFi ecosystem, which is largely based on Ethereum.

However, one analyst now notes that ETH could see some upside momentum once investors start converting profits from DeFi tokens like COMP into Ethereum and Bitcoin.

“In the last 5 days, a market capitalization of> USD 500 million was created for COMP. Given the negative financing rates [FTX]I assume that these people do not rely on HODL COMP, but rather on securing the returns. Expect a little pump in the ETH & BTC if everything collapses, ”he said.

Will the end of the DeFi hype fuel a historic ETH bull run?

Although the aforementioned analyst only believes that fading DeFi hype will fuel a small Ethereum pump, another prominent analyst stated that he believes this could spark a historic bull run.

“Ethereum is on the verge of breaking out of the newbie market, like Bitcoin did 9 years ago. Positive market sentiment is fertile ground for future promises in which story assets like ETH will thrive. The latest DeFi bull market is about to implode and flow into ETH, ”he said.

Image courtesy of Light. Chart over TradingView

If you look for an inverse correlation between the price of the popular DeFi tokens and Ethereum, you can see how influential the drop in these tokens will be on the price of crypto.

Featured image from Shutterstock. Charts from TradingView.

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