The crypto market traded higher at press time, helped at least in part by traders scaling back expectations for a 100 basis (1 percentage point) hike in borrowing costs by the Federal Reserve (Fed) later this week.

In the lead were major decentralized finance coins, boasting double-digit percentage growth in 24 hours and outperforming market leaders bitcoin and ether.

Cryptocurrency lending platform Aave's native coin AAVE was up 15% at $91. Last week, AAVE proposed a decentralized yield-generating dollar-pegged stablecoin GHO to expand services offered on the platform. GHO is likely to generate additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrowing to the DAO, the proposal said.

Decentralized exchange Uniswap's UNI traded at $7, representing a 13% gain. Bitcoin, the biggest cryptocurrency by market value, changed hands at $20,660, up 3.5%, while Ethereum's ether token was priced at $1,200, up 8%. Other notable gainers were programmable blockchain Solana's SOL cryptocurrency, privacy-focused coin monero, Polygon's MATIC, cosmos and algorand.

Rates traders saw a 49% chance that the Fed would deliver a full-percentage-point interest-rate hike on July 27, a significant decline from 80% seen after the release of Wednesday's Consumer Price Index (CPI), an indication of inflation or deflation, according to data tracked by the Chicago Mercantile Exchange's FedWatch tool.

The repricing of the probability lower began later Thursday after Federal Reserve Governor Christopher Waller said the "markets may have gotten ahead of themselves" in pricing in a 100 basis point rate hike for July.

However, Waller said he supports a 75 basis point rate hike later this month and may consider a bigger rate hike if the retail sales and housing data paint a positive picture of the economy.

Due Friday at 12:30 UTC, or 8:30 a.m. EST, the retail sales data is likely to show that consumer spending increased by 0.9% in June. The housing data due on July 19 could show housing starts tumbled 14.4% in May, while building permits dropped 7%.

DeFi outperformance a flash in the pan

Observers were unsure if the rally in the DeFi majors would be long-lasting, given the fundamentals remained weak.

"Sure, we see some rally in the DeFi coins for now, but fundamentally nothing has changed. The total value locked has been destroyed," crypto financial services firm Amber Group said, while noting the absence of large buying.

"We have seen some institutional mandates scooping up majors and DeFi blue chips, but it's not like massive amounts," Amber's trading desk told CoinDesk.

The total value locked in the DeFi protocols has crashed to $38 billion from $95 billion this year. And there was hardly an uptick as of writing, according to data source Defi Pulse. The total value locked is the amount of user funds deposited in the DeFi protocols and is one of the most commonly used metrics to assess the sector's growth.

Other indicators, such as the volume of bitcoin locked in DeFi and the number of addresses lending and borrowing in DeFi protocols, pointed to a continued slowdown in the activity.

"The volume of wrapped bitcoin participating in DeFi protocols is a clear indicator of the DeFi momentum among more traditional crypto investors," Jesus Rodriguez, CEO of the analytics firm IntoTheBlock, wrote in an DeFi analysis piece published Tuesday. "Recently, that indicator has dropped to a near all-time low, signalling a slowdown in the DeFi activity among Bitcoin holders."

Chart

The percentage of bitcoin's circulating supply tokenised on Ethereum and locked in DeFi fell to a near record low of 50.6% on July 8 and was last seen at 50.8%, data tracked by IntoTheBlock shows.

Rodriguez cited the decline in the number of addresses borrowing and lending to a 12-month low as another indicator of DeFi winter, along with a drop in the number of loans above $100,000 and transaction costs on Ethereum.

Explaining broader market resilience

The crypto market's remarkable show of strength since Wednesday's CPI release has analysts scrambling for an explanation.

Amber said traditional and crypto markets were short while heading into the CPI release. Bitcoin, for one, fell to $19,200 from $21,600 in the three days leading up to the inflation data published on Wednesday. Wall Street's tech-heavy Nasdaq index dropped more than 250 points early this week on fears an elevated inflation would compel the Fed to suck off liquidity at a faster pace.

Perhaps, a potential ugly inflation figure was priced in advance, allowing for some stability since the data release.

"What's helping now is perhaps the absence of further massive liquidations," Amber's trading desk said. "The crypto market was slammed from the previous CPI [released on June 13] till now and massively underperformed traditional markets during that period."

And while several indicators say the bottom is in, the probability of the market witnessing a quick bull revival appears low, thanks to the worsening outlook for global economic growth, persistently high inflation and continued Fed tightening.


All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.

Recommended content


Recommended Content

Editors’ Picks

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC declines as resistance emerges near all-time high

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC declines as resistance emerges near all-time high

Bitcoin and Ethereum are approaching their key support levels, and a sustained close below these marks could lead to further declines. 

More Cryptocurrencies News
TON set to launch synthetic Bitcoin to boost its DeFi solutions

TON set to launch synthetic Bitcoin to boost its DeFi solutions

TON revealed its plan on Thursday to launch a synthetic Bitcoin token on its blockchain, allowing users to trade, stake, and earn yield using BTC. Following the announcement, TON is down over 3%.

More Ton News
Maker Price Forecast: MKR could stage 40% rally

Maker Price Forecast: MKR could stage 40% rally

MakerDAO is up 2% on Thursday and could be set for a 40% rise in the coming weeks if it successfully maintains an extended move above the descending trendline of a falling wedge. On-chain data also supports the bullish outlook after a four-month-long decline.

More MakerDAO News
USDT market cap crosses $120 billion as stablecoins continue their uptrend

USDT market cap crosses $120 billion as stablecoins continue their uptrend

The stablecoin market cap continued its uptrend in October, characterized by USDT reaching a $120 billion market cap, according to a CCData report on Thursday. This indicates that investors are preparing liquidity to fuel more demand.

More USDT News
Bitcoin: New all-time high at $78,900 looks feasible

Bitcoin: New all-time high at $78,900 looks feasible

Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP