The crypto market climbed higher on Friday, helped partly by traders pulling back their expectations of a hike in the interest rate by 100 basis points by the US Federal Reserve in its meeting scheduled for the end of the month.
DeFi coins in the lead
It was decentralized finance (DeFi) tokens that took the lead in the market rise, as they were able to record growth in double-digits in 24 hours, which helped them outperform other market leaders like Bitcoin (BTC) and Ether (ETH).
The native coin for crypto lending platform Aave called the AAVE token had climbed up by 15% to reach $91. This was after the platform announced the launch of a stablecoin by the name of GHO last week, which would be pegged to the US dollar and would be decentralized.
The proposal indicated that the GHO stablecoin would be able to generate additional revenue for the Aave DAO (decentralized autonomous organization). It would accomplish this goal by sending the DAO 100% of the interest payments that are generated through GHO borrowing.
There was a 13% gain in the UNI, which is the token of decentralized exchange (DEX) Uniswap, as it reached a price of $7.
The biggest crypto in terms of market capitalization, Bitcoin only recorded a gain of 3.5%, as it was changing hands at $20,660. Meanwhile, Ethereum’s ether (ETH) token climbed up by 8% to reach a value of $1,200.
Some of the others that made notable gains included the SOL cryptocurrency of programmable blockchain Solana, Polygon’s MATIC, algorand, cosmos, and the privacy-focused crypto called monero.
According to rates traders, there is a 49% possibility that the Fed would hike the interest rates by a full percentage point on July 27th, which is a fall from the 80% predicted when the consumer price index data was released on Wednesday.
Flash in the pan
However, it should be noted that observers are unsure if the DeFi majors would be able to sustain this rally for long, considering that there is still no big change in the fundamentals. Market analysts said that DeFi coins are definitely seeing a rally, but since there is no fundamental change, it may not last.
After all, there is still no large buying and the total value locked in the DeFi ecosystem has been completely destroyed. While some institutional traders did pick up DeFi majors and blue-chips, but it was only in small amounts.
This year alone has seen the total value locked in DeFi platforms come down from $95 billion to $38 billion. The TVL is one of the leading metrics that are used for assessing the growth of the sector. There are some other factors that are also used, such as the volume of bitcoin locked-in protocols and the borrowing and lending addresses. All of these also indicate that activity has slowed down in the DeFi sector significantly, which means it is possible the rally may not last for long.