eToro’s Q3 Report Argues DeFi Will Continue to Boost ETH

Social trading platform eToro, in association with The TIE, has released a Q3 report analyzing the state of the crypto market. Published on Oct 15 and titled “What Moves the Prices of Cryptoassets,” the report covers the trends that occurred from July to September. Additionally, it makes the case for DeFi and Ethereum and expects the former to support the latter’s growth. The collaboration examined the performance of various assets by trading volume, price, and social sentiment. In terms of global trading volume, most tokens were in the green, with Bitcoin being the notable exception. TRON and NEO were the top assets with respect to trading volume and price growth over the last two quarters.

Perhaps more interestingly, the two firms analyzed long-term social media sentiment for the major projects. Zcash, Cardano, and Ethereum scored highest in this regard. However, TRON received the highest volume of tweets last quarter, with a 228% increase in tweet volume. Ethereum came in second with a 54% increase between the last two quarters. However, Bitcoin remains the dominant conversation topic, with average daily tweets numbering 24,998. Ethereum came in second with 10,077. eToro Managing Director Guy Hirsch believes that the last quarter will remain unpredictable, due to COVID-19 and the US elections. Meanwhile, The TIE CEO Joshua Frank suggested that the market is still a retail one. He argues this despite impressive institutional and market infrastructure growth in 2020.

SigDevs Moving the Market

The report then proceeded to analyze what developments were pushing prices up. The firms scrutinized which significant developments, or “SigDevs,” and sentiment data, may have boosted prices. The report states that certain SigDevs do indeed have a positive effect on prices. The analysis looked at the maximum price increases 24 hours after the announcement of SigDevs. Examples of SigDevs include exchange token listings, partnerships, funding, and acquisitions. The former two appear to have a positive effect that lasts a week. The latter two, on the other hand, have positive effects that last over a week. Negative developments, like 51% attacks, have a pronounced effect as well. As an example, it cites the listing of Aragon on OKEx, Binance, and Huobi. Listing on these exchanges over a two-day period saw a continual boost of its price in the short term. Following the initial week, however, the prices dropped off to pre-listing levels.

The team then compiled the effects of various of these SigDevs. After mergers/acquisitions and funding, mainnet launches, forks, and employment changes had the biggest effect over a week. The team then computed the probability of a price increase for these developments. Mergers/acquisitions appear to have a 90% chance of a price increase over a week. Most of the other SigDevs have a price increase probability of between 50 – 60%.

Defi Growth Slowing, but Ethereum Shows Bullish Signs

The most prominent development in the space over the past six months has been DeFi. While the mania appears to have subsided, the overall outlook is optimistic, the firm’s state. They explain that DeFi will have a strong impact on the value and sustainability of Ethereum. Analysts have compared the DeFi boom to the 2017 ICO mania. DeFi is reportedly at the same level of mania, though many investors are “hunting new projects for the highest yields.”

As a result of the new protocols and platforms like Uniswap, eToro and The TIE believe that ETH has strong underlying value because all major DeFi platforms require ETH at some point in the process. Additionally, they cite the invention of new protocols as a good sign for the second-largest crypto by market capitalization. They suggest the strong correlation between ETH’s market cap and the total value locked in DeFi is evidence of this. The primary section of the report concludes that DeFi is here to stay, due to lowered investment barriers. As a result of this new influx of users, the firms expect more capital to spread to various projects.