Catalysts for DEXs & Ethereum positive trend

Following the Huobi's statement to retire Chinese user accounts on September 26, the price of its token (HT) dropped nearly 20% before recovering some of the losses. Conversely, decentralized exchanges' tokens recorded double-digit gains:

Why it matters

One of the key characteristics of decentralization is censorship-resistance, and the recent Chinese ban points to its relevance. 

• With the Chinese government cracking down on centralized exchanges, decentralized venues are likely to benefit
• A greater emphasis on decentralization is likely to persist as regulators globally move to regulate crypto

While the market seems to be pricing in this as a catalyst for DeFi tokens, Ethereum also stands to benefit as the infrastructure powering most of these protocols. Moreover, increasing activity in DeFi is likely to reduce ETH's net issuance given that EIP-1559 now burns part of transaction fees. 

Annualized net issuance for Ether has dropped below 1% for the first time in three weeks, remaining significantly below the 4% pre-1559 average. This is the case as 81% of the ETH paid on transaction fees in the past 30 days has been removed from circulation. Recent news also suggest a positive trend for Ethereum.

Social media embraces NFTs

Twitter teased a new feature verifying NFTs on Ethereum displayed as profile pictures. Meanwhile, TikTok takes it further with the announcement of Top Moments, a selection of recognized videos that will be sold as an NFT collection on Immutable X, a layer 2 scaling solution for Ethereum.

Grounds for adoption

Visa announced it is working on a "Universal Payment Channel" (UPC) for central bank digital currencies (CBDCs) and stablecoins. The UPC aims to function similar to a layer 2 solution offering higher transaction speed, but also offering interoperability between the different currencies running on top of it. Ethereum is the proposed base layer for UPC as per Decrypt.

The bottom line

Adoption for Ethereum and its ecosystem has been growing quickly and is poised to continue.  

• The number of addresses holding ETH (a proxy to the number of holders) hit a new all-time high of over 62 million, increasing 33% year over year.
• Total value locked (TVL) on DeFi on Ethereum is currently at $124 billion, 13.7 times greater than it was on October 1st, 2020.