DeFi-tokens corrected heavily over the past 30-days but on-chain data suggest Ether is in the early stages of a bullish reversal.
Santiment, a cryptocurrency data analytics firm, recently noted that the number of deposits to exchanges has been decreasing since the start of September. According to the firm, the number of addresses used to send Ether to exchanges has seen a 53% decline since Sept. 1.
Data from glassnode, a onchain analytics resource, shows the number of addresses holding at least 0.01 Ether reached a new all-time high at 10,116,076.
While it is hard to affix a concrete value to crypto assets due to the high levels of market volatility, Ether has been a top performer in 2020 and the altcoin still significantly outpaces the gains seen from Bitcoin.
DeFi activity continues to expand
The decentralized finance sector has dominated the crypto world in 2020 and it is clearly one of the main reasons for the increased interest in Ether and other digital assets.
Total value locked in DeFi. Source: Digital Assets Data
In September the price of DeFi tokens took a massive hit but user activity within the sector is still holding strong.
Trading activity within the sector has also reached new highs. Take for example, the Uniswap decentralized exchange, which in September saw a record monthly volume of $15.3 billion, a figure which exceeded Coinbase.
DeFi will have some growing pains
Even though on-chain analysis paints a bullish picture for Ether, it is also worth noting that the Ethereum blockchain is currently sitting on a weak foundation as congestion and high fees continue to be an issue for the network.
This has led developers and various DeFi platforms to begin searching for and experimenting with blockchain networks that offer layer 2 technologies. While the integration of layer 2 solutions are unlikely to diminish demand for Ether, there are other more menacing clouds forming.
Last week the CFTC and DOJ dropped the hammer on BitMEX, arrested its co-founder and announced that the exchange owners were charged of operating an illegal derivatives exchange and violating the banking laws.
On Oct. 5 the U.S. Department of Justice also announced that John McAfee had been arrested in Spain for tax evasion and the U.S. Securities and Exchange Commission (SEC) alleges that McAfee promoted initial coin offerings (ICOs) without disclosing that he was being paid by the ICO issuers to tweet about each project.
What is clear is that authorities and regulators intend to pursue individuals and businesses which evade the law in order to promote their crypto products and services.
Given that decentralized exchanges like Uniswap lack KYC and AML policies, DeFi could easily be the next target that the SEC, CFTC and DOJ go after, especially with the growing number of scam projects in the space.