Ethereum, the largest smart contract platform, is currently serving as the infrastructure for numerous popular projects. So, what is the status of the popular categories in its ecosystem? What is the relationship between the price performance of Ethereum and the price of altcoins on the network? Will this change in the future?
According to Glassnode, the popularity of Decentralized Finance (DeFi) and GameFi sectors operating on the Ethereum blockchain is increasing day by day. However, the same data indicated that the growth of these sectors couldn't match the hype. The local token valuations of these projects were in the same situation. Ethereum, the largest cryptocurrency platform, has virtually become the "computer of the internet," and continues to progress in this direction.
Despite difficulties like high transaction fees and scalability issues, the support Ethereum’s ecosystem received from altcoins was insufficient. On May 31, the on-chain analytic platform analyzed ETH's correlation with projects using the DeFi blue-chip index. The blue-chip index tracks the real-time market performance of the largest DeFi projects. According to the report, Ethereum moved in a similar fashion with the tokens under the group. However, there were times when the correlation diverged.
For instance, when ETH reached the ATH level in the last bull season, the total price performance of the tokens decreased by 43%. Despite the similarities in the trend, ETH continued to perform better than tokens.
After the 2022 bull market, while DeFi tokens fell 92.1% below the May 2021 ATH level, the ETH price only lost 45% of its value. Moreover, interest in DeFi did not increase as expected after the FTX crash. Central exchanges such as OKX and Binance have much more liquidity than DEXs like Uniswap (UNI) and pools like Curve Finance (CRV).
In addition, most DeFi tokens generally functioned under their own ecosystems. UNI, with a wide range of applications, became a standout token. This was because it operated beyond its main domain.
In conclusion, ETH plays a significant role in the growth or decline of these tokens. In the future, for the adoption of applications and their tokens to become more valuable, ETH's price needs to reach better levels. For now, altcoins in the Ethereum ecosystem largely can't move on their own.
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