Written by Facundo Zamora, CEO of Finanflix and Juan Ignacio Moroa, CFO of Finanflix
since then Black stone (NYSE: BLK) announced it Bitcoin (CRYPTO: BTC) ETF, the market capitalization of BTC has soared, now exceeding $1 trillion – a massive number. To put this into perspective, even if you combine the market capitalization of large companies e.g coca cola (NYSE: KO), Disney (NYSE: DES), AMD (Nasdaq: AMD), and Intel Corporation (NASDAQ: INTC), their total would still fall short of BTC's massive valuation. This amazing growth not only underscores the huge market confidence following Blackrock's endorsement, but also highlights Bitcoin's growing influence in the financial world. The waterfall effect is inevitable, with smaller but larger funds like Fidelity and Templeton following the same path.
The market is rarely wrong when it comes to pricing in announced future events, and today we are seeing the price of Bitcoin reach an all-time high ahead of the next halving, something we have never seen before. The euphoria of BTC surpassing $73,000 is clearly not the same as the euphoria of $69,000 during 2021, with the market rebounding and expectations of a downward path for the federal funds rate. Furthermore, it should be noted that Blackrock is now purchasing over $45 million worth of BTC daily.
Looking back, we have seen that the cryptocurrency market grows at a rate between 10x and 50x after each halving. We have yet to see approval for an exchange-traded fund, which Blackrock also offered.
Ethereum (CRYPTO: ETH) provides the critical blockchain infrastructure needed to build applications for enterprises. Among the thousands of applications, we find Infura and Consensys, both owned by the company JP Morgan (NYSE: JPM). Therefore, it would not be too far-fetched to imagine a scenario in which the price of Ethereum rises above the $1 trillion market cap in the short to medium term, which could lead to its price exceeding $10,000 per ETH. In this case, we could see a departure from the traditional cryptocurrency theory of capital migration, with funds flowing first into Bitcoin, then into Ethereum, and subsequently into high-value, low-value, and altcoins, respectively. This time, Ethereum may be charting its own, somewhat independent, course.
Our analysis at Finanflix concludes that the Ethereum token is becoming increasingly deflationary as activity on its blockchain rises, thus influencing DeFi behavior.
After the Ethereum brand and token experienced a major boom, we should expect a significant portion of capital to move to DeFi protocols built on its blockchain. Initially, the Ethereum infrastructure will have difficulty handling the massive increase in transactions, when Layer 2 protocols such as resolution (encryption: ARB), optimism (encoding: OP), and ribbed (CRYPTO:MATIC), among other things, will see a significant spike in activity. This will put upward pressure on their prices since the tokens of these protocols are needed to pay fees, and all funds flowing from ETH will naturally first gravitate towards the protocols closest in terms of usage. Having previously seen price returns of over 1000%, we would not be surprised to see a similar situation under these conditions.
A closer look at decentralized applications (DApps) running on Ethereum can reveal price discovery events with UNI from com.uniswap (CRYPTO: UNI), the leading decentralized exchange for Ethereum, exceeding $100 per token, or ghost (CRYPTO: AAVE), the underlying lending protocol for Ethereum, up to $1,000.
Finally, regarding countless low-cap protocols like Verasity or Arkham, not to mention crypto/altcoins, the potential returns are uncertain. We must remember that when a true bull market hits the cryptocurrency market, the market can become completely irrational.
Today, the total value of locked DeFi is back at over $100 billion. But this time, the ecosystem is more sophisticated, the protocols are generating revenue, and the overall market conditions are unlike anything we've seen before. This precedent will likely raise DeFi to new levels of verification and trust, and once that happens, we will see a truly different model. The opportunity cost of skepticism in these times can be very high.
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This article DeFi's New Dawn: Ethereum Rally Paves Way for Unprecedented Growth originally appeared on Benzinga.com
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