Although Decentralized Finance (DeFi) has only blossomed over the last year, fundamental investors have increasingly moved away from just memes to on-chain data. However, while data paints a picture of the status of the industry, it’s not clear which metrics are important for price movement and which aren’t. In this report, we look at data to figure out if fundamentals matter and, if so, which DeFi tokens might be leaders in a price recovery.
Our hypothesis is that fundamentals do matter and there needs to be some value accrual to the protocol and investors. Perhaps tokens with more use-cases than pure governance will outperform those that have solid operating metrics. The counter argument is that price recovery is independent of fundamentals, and more dependent on external factors such as correlation to Bitcoin and social media activity. Perhaps governance as the only use case is sufficient and tokenholders care about other factors such as the ability for the team to drive growth with a large warchest. We address decentralized exchanges (DEXs), lending protocols, and asset managers across different metrics to test our hypothesis. We use weekly data to smooth out daily outliers across various metrics, including:
- Number of active users
- Trading volumes on decentralized exchanges
- Total value locked
- Interest per year on lending protocols
- Amount deposited in lending protocols and the amount of outstanding loans
Blockworks Intel