Crucial DeFi Correction Could Pull Bitcoin Lower, Analyst Says

Bitcoin could head lower as DeFi coins lose momentum

On the one hand, the price of Bitcoin has been relatively stagnant recently; on the other hand, the top tokens in the field of decentralized finance (DeFi) are experiencing a strong correction.

Yearn.finance (YFI), widely considered the most prominent project in the DeFi space, has fallen more than 35% from its all-time highs set a few weeks ago. The coin is now trading at $27,000, well below its highs of $44,000.

Previously, other DeFi coins also began to decline.

Coins like Aave’s LEND, Synthetix’s Synthetix Network Token, and others have also fallen over the past few days as selling pressure mounts following their parabolic rallies.

Analysts believe that DeFi’s weakness may not bode well for Bitcoin and other top cryptocurrencies. One trader commented that DeFi could be a drag on Bitcoin’s future development:

“$YFI has fallen slightly, using it as a representative of DeFi because it has a cap of more than $1 billion and is a veteran in the field. I tend to think that DeFi is not doing well is not good for $BTC because the DeFi field has brought a lot of investment to the crypto industry in the past few months. Will continue to pay attention to it, and the same is true for $ETH.”

There is no definitive analysis yet to confirm whether Bitcoin and DeFi are correlated, but it is something to watch.

DeFi’s long-term uptrend remains intact

Fortunately, most analysts remain bullish on decentralized finance in the long run.

Former Messari product lead and crypto trader Qiao Wang recently commented:

“From an investment perspective, BTC pre-2013 and ETH pre-2015 were once-in-a-lifetime high-yield bets. DeFi pre-2021 was a once-in-a-decade IMO (before being proven wrong). Don’t miss out on the latter if you missed the first two.”

Assuming that all sectors of the crypto market are correlated, a long-term rally in DeFi will likely drive interest in Bitcoin and other top cryptocurrencies.

Source: Bitcoinist