Screen Shot 2021 03 04 at 2.17.08 PM

DeFi Rebounds After Bleak February

DeFi is regaining its footing in March after a market-wide plunge at the end of February.

The DeFi Index Pulse is up 14% this week after dropping more than 20% in the last week of last month. Total value locked (TVL) too, is on the rise in March after a weeklong 20% tumble  to $36B from a Feb. 21 all-time high of $45B. TVL now stands at $40B.

ETH Leaving Exchanges

While ETH has been slower to recover, up 11% this week, inflows to exchanges have decreased to 493k from a 30-day peak of 1.4M on Feb. 23, and from 1M a month ago, according to market analysis platform, Chainalysis.  

Inflows of Ether into exchanges generally signal selling pressure as investors move their assets from personal wallets in order to sell them. The lower inflows suggest decreased ETH selling pressure as investors are happy to keep their Ether within the crypto ecosystem.

Despite the 67 day low of seven-day average inflows, the low point isn’t a major outlier as it doesn’t deviate more than 6% from 30, 90, and 180 day ETH seven-day inflow averages.

Outstanding Debt of Three Major Lending Projects at All-Time High

Outstanding debt of major lending protocols, MakerDAO, Compound, and Aave, has also reached an all-time of $8B in loans, after dropping from the previous all-time high just short of that mark on Feb. 21 before the week-long pullback.

This indicates rebounding investor sentiment as these loans are often backed by non-stable collateral like wrapped Bitcoin (WBTC) and Ethereum. If investors believed they were risking future liquidation, they would likely take out less loans. DeFi lending is also used as a way to maximize long positions, as most assets borrowed are used to buy more crypto. 

The three protocols take the top three slots of DeFi Pulse’s TVL ranking with Maker, Compound, and Aave, sitting at $6.3B, $5.2B, and $5.1B respectively.

Futures Open Interest Dropped 

The Feb. 21 through 28 drop in Ether and DeFi asset prices coincided with a drop in open interest in the Ethereum futures market.

Open interest data is typically used to confirm the strength of a trend. As per the CME Group, which launched ETH futures contracts on Feb. 8, “increasing open interest is typically a confirmation of a trend, whereas decreasing open interest can be a signal that the trend is losing strength.”

Ether open interest peaked on Feb. 2 and has since slid from a record high of $7.5B, according to data compiled by The Block. The sliding open interest as prices also fell may signal the slump was a temporary correction after ETH and DPI reached respective all-time highs of $2038 and $505 on Feb. 20, and not a longer-term slump.