Ethereum-supported DeFi projects have seen exponential gains in recent weeks. Some analysts are now suggesting that Bitcoin could start to lose ground
Ethereum has been considered by some to have more positive potential than Bitcoin.
Bitcoin, for all intents and purposes, is a decentralized digital asset, while Ethereum can also facilitate smart contracts and host decentralized finance tokens (DeFi), such as compound token and BAT (primary care token).
Bitcoin's position can be seen as a double-edged sword.
On the one hand, it will always be seen as the first successful digital currency, thanks to the blockchain and the underlying cryptocurrency protocols. On the other hand, being the first of something also means being the oldest; therefore, your network will show its age as more complicated protocols emerge in the crypto space.
This is where the problem of DeFi for Bitcoin comes into play. For Ethereum, newer and more sophisticated financial instruments can be built on its blockchain – mainly because its team of developers remains very active and has four times the number of developers than any other cryptocurrency project.
There are currently $ 141 million blocked in DeFi by Bitcoin, leading to what was argued to be an inflated price.
Chris Burniske, one of the top cryptocurrency writers, said on Twitter that “DeFi is just getting started:“ $ BTC is great, but the emotional obsession with it is not -> obscures rationality. #DeFi is just getting started, guys. I would hate those who were here all the time to miss the boat. ”
Altcoins that have benefited from the DeFi boom are often paired with BTC, meaning that traders need to use Bitcoin to buy and sell altcoins, leading to Bitcoin's ‘DeFi boom’.
This has also been a 'blocking' of an increasing amount of Bitcoin's supply over time, leading to a decrease in supply and thus increasing the value.
Since Bitcoin was built without the ability to DeFi or smart contracts, some investors may begin to wonder what is the point of holding an asset that undoubtedly does nothing, like gold and silver.
However, cryptocurrency markets are fickle. The volumes that gave rise to the DeFi projects could very easily work in the opposite direction to eliminate the value in the form of a severe downturn – possibly taking Bitcoin with them.