DeFi Tokens Are Pumping Strongly, Why Isn’t Ethereum?

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DeFi Tokens Are Pumping Strongly, Why Isn’t Ethereum?
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Messari reacher and financial expert, Ryan Watkins is wondering why DeFi tokens are experiencing such a boost in cryptocurrency markets but ETH is remaining stagnant.

“DeFi is mooning.

Why isn’t ETH?

The short story is that there’s no direct reason why ETH needs to rise with DeFi.

The long story is that it may do so anyways.”

Watkins says the issue is complicated but essentially due to stable coins, ETH isn’t necessary as an on-ramp for new users. Watkins pointed out that Qiao Wang, a crypto advisor, was considering this back in 2019. 

He basically argued that investors are most interested in tokens that might explode. And with stablecoins, newcomers will skip over Ethereum to fulfill this strong speculative preference.

“Thesis: stablecoins basically killed the chance for any smart contract platforms to accrue significant monetary premium.”

Watkins explains that one of the original reasons why ETH exploded has been stripped and its showing in the price action.

“There’s no need to actually touch ETH when you can buy a DeFi token because you can just use widely available crypto dollars.

For an increasing amount of DeFi tokens, you can even just use a bank account.”

The avid researcher considers “crypto dollars” a threat, but he still thinks DeFi will provide future needs and uses for Ethereum. 

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“Now for the longer story.

There are other ways in which DeFi’s growth can create direct demand for ETH. 

After all, many DeFi protocols require capital to work. 

Anytime you want to borrow money on Ethereum for example you must post collateral.”

Watkins goes on to explain that if ETH 2.0 delivers as many experts expect it will, it can become the hub of an entire self-contained blockchain economy.

“It is possible that within a couple years, ETH may not only be the most useful asset in crypto given its on-chain economy, but also crypto’s most credibly scarce asset given ETH 2.0 and EIP 1559.

Only time will tell.”

According to Watkin’s theory, a variety of use cases will emerge from the achievement of ETH 2.0. Ultimately if the Ethereum foundation builds a product that is fast and efficient, not only will the DeFi world buoy the value of ETH but gaming, real estate, and a number of other industries continue to evolve and make contributions to Ethereum and the greater cryptosphere.