Since the announcement of the Ethereum London hard fork, the price of ETH and ETH-related projects has catapulted from recent lows. Without a doubt, the update had a ripple effect on NFTs and DeFi projects. Solana’s SOL, also known as the Ethereum Killer, swelled by 67.1% last week, while trading volume for NFTs has surged 12,000% year-to-date. As the cryptosphere enters a brand new trading week, will the bullish rally fueled by DeFi and NFTs continue?
DeFi-ing the Odds
Stars aligned for Solana and Terra last week, as both DeFi projects shrugged off news of the massive $600 million hack on Polygon and rocketed to the moon. Since the wormhole update and the sale of Degenerate Apes NFTs, Solana total value locked (TVL) has peaked at $2.4 billion last week. As compared to its market cap, SOL TVL is tracking closely — and this usually leads to short-term upward price action.
Galactic forces are also in favor of Terra’s LUNA, as its price climbed 56% last week. Its TVL and market cap have also increased steadily over the past month. However, the spur is showing signs of fatigue — indicating a possible correction.
Although ETH has been on a downward spiral last week, the number of active DeFi wallet addresses still highly correlates with the price of ETH.
Buy the Hype, Sell the News
Fancy some cutesy avatars? NFTs have once again stolen the limelight this week as OpenSea processed $1.02 billion worth of trades year-to-date. However, luminaries of the industry have drawn similarities between the NFT boom and initial coin offerings (ICOs). The hype for NFTs has even surpassed ICOs based on the past three year’s Google search trends.
Source: Google Trends
A recent study between tweet volume versus monetary volume by Meltwater also reveals the true value of the hype around the NFTs. Although Ocean Front NFT garnered the highest mention on Twitter, its NFT was only sold for $7.58 million.
The heat-up of NFTs can be attributed to the expectations of lower gas fees, due to EIP 1559’s burn mechanism. Furthermore, the play-to-earn model has also attracted plenty of fresh blood.
According to DappRadar, most of the traffic for play-to-earn NFTs such as Axie Infinity is led by emerging economies including the Philippines, India and Venezuela. What’s more, whales are also drawn to the NFT arena. 9% of the CryptoPunks collection, which is worth more than $103 million, are owned by whales.
EIP 1559 could also be a double-edged sword, as it allows users to pay extra gas fees for expediting the minting of NFTs. A new form of gas war may inevitably sprout and spread from the NFT to the DeFi space.
On top of the weekend wonders, BTC surpassed $50,000 again for the first time since May 2021. As for BTC watchers, the buzz surrounding the U.S. central bank’s taper tantrum continues to keep investors on edge. Some say it could be too soon to party like it’s April 2021.
Disclaimer: The article serves as an educational piece and is not intended for investment advice. All investment and trading encompass direct and indirect risks, reader should consider their financial goals and risk tolerance before investing in any cryptocurrency.