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Profit taking on DeFi dragging Ethereum lower

4


With the overall crypto market crashing, Ethereum is posting its biggest weekly drop in 5 months, driven by the large capital outflow from DeFi.

The decline in the DeFi market was already more than healthy at this point, after in just 30 days it will increase its capitalization by 92%.

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Total value locked in DeFi. Source: DefiPulse.

Strong speculation, overconfidence and lack of regulatory frameworks in decentralized finance, created the perfect breeding ground for criminal projects to be carried out.

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Overdue food causes negativity in DeFi and Ethereum

Pizza, Hotdog and Sushi were among the centers of attention this week at DeFi, smart contracts that offered absurdly high returns for those who decide to use them. The downside is that these foods expired too quickly.

Before reaching their first 24 hours of life, these ‘’ projects ’’ suffered blatant Pumps and Shock, a behavior better known as Pump and Dump.

Before reaching their first 24 hours of life, these ‘’ projects ’’ suffered blatant Pumps and Shock, a behavior better known as Pump and Dump.

These cases were spawned by Ethereum farmers who inflate the price of the token, and then come out taking it almost to zero.

These dangerous foods are born from a protocol that had raised enthusiasm in the DeFi ecosystem, called Yam Finance; And it was just all the rage for accidentally locking $ 750,000 into its smart contract, dragging the price of the token quickly to 0.

Some analysts think that we are experiencing a speculative bubble in DeFi, similar to the one that was experienced in 2017 with ICOs, where regulations were the only thing that stopped it; sooner rather than later the SEC could go after the DeFi.

YFI survives the first crisis

Ethereum’s current price is $ 353, which is a reduction of almost 30% from the recent high of $ 487.

While this decline was happening, yearn.finance stopped deposits in the Ethereum vault. This is because 70 million DAI had been minted, which for the team behind the project considers a limit high enough to balance the best returns and the best risk adjustment.

The vault and ETH DeFi survived, and even grew in terms of liquidity, since Ethereum is cheaper now. To maintain the guaranteed debt position, 3 readjustments were made to pay 2.7 million DAI.

Ethereum technical analysis

After hitting the target that we had forecast for several weeks, at $ 486, the offer was enough to initiate a significant reversal of the medium-term uptrend, followed by the 8 EMA moving averages and 18 week SMA.

Currently the price is rejecting a key level at $ 308. Despite the fact that this behavior could be classified as a valid reversal before continuing to rise, there are not too many signs yet to confirm that the decline is over.

, Profit taking on DeFi dragging Ethereum lower, Forex-News, Forex-News
Ethereum weekly chart technical analysis. Source: TradingView.

Daily chart

In the time frame with daily candles we observe a clear short-term downtrend, reaffirmed with the break of the support at $ 379.

The 8-day EMA and 18-day SMA moving averages follow this direction.

The 200-day SMA is still bullish, supporting Ethereum’s strong gains over the past few months.

As I mentioned, a support zone at $ 308 is being visited and rejected.

Although it could be a good place to end the decline and thus continue the dominant uptrend, it is still likely that the named support will be crossed, or at least that it will be visited again.

All our publications are informative in nature, so in no case should they be followed as investment advice.

, Profit taking on DeFi dragging Ethereum lower, Forex-News, Forex-News



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