In a report released on Wednesday, Glassnode attributed the decline to Ethereum’s recent introduction of a staking feature that has enticed investors with its potential to generate percentage returns of up to 4%.
The company has reported that investors can now procure returns on their cryptocurrency investments with a reduced level of risk coupled with an elevated degree of reward.
“It is highly likely that the lackluster performance of DeFi tokens over the last two years is a factor or the emergence of native ETH staking yield,” according to the report. It has been noted that the market capitalization of DeFi currently accounts for a mere 12% of its historical high achieved in November of the year 2021.
DeFi represents an all-inclusive classification of cryptocurrency initiatives that endeavor to displace conventional finance through intermediary elimination and the automation of activities such as lending and borrowing. Numerous decentralized financial (DeFi) initiatives operate on the Ethereum blockchain network.
“Blue-chip” Decentralized Finance (DeFi) tokens, which have earned a stellar reputation, have attracted substantial investments following the surge in popularity of the DeFi landscape in 2020. Prominent among the blue-chip projects are Uniswap, a decentralized exchange platform, and Aave, a lending pool. In this regard, billions of dollars were injected by investors into these blue-chip DeFi initiatives.
According to Glassnode, projects of this nature have experienced a significant decline in their market capitalization. The rationale underlying this move can be attributed to the need to establish competitiveness with Ethereum, a cryptocurrency that appears to furnish stable returns with minimal associated risk.
One of the reasons for this outcome is that the blockchain supporting the cryptocurrency with the second-largest market capitalization underwent a successful upgrade in April. This upgrade enabled investors to securely commit their ETH to the network and obtain returns for their pledged cryptocurrency.
Presently, individuals have the opportunity to achieve superior incentives while facing reduced levels of risk.“Not only is downside performance and volatility equivalent to ETH, but the upside performance is measurably less,” according to Glassnode.
The head of research for the blockchain data application Cielo, ZoomerAnon, stated to Decrypt that concerning, “DeFi to remain attractive to users,” they need to adopt liquid staking on Ethereum.
The concept of liquid staking facilitates expeditious access for investors to their pledged cryptocurrency assets through the issuance of redeemable tokens in exchange for staked assets, which can be effortlessly transferred to alternate locations.
“The battle to reignite interest in DeFi tokens is likely underway, but given the new hurdle rate set by the ETH token itself, it is unlikely to be an easy one,” Glassnode said.
