The last few days will go down in cryptocurrency history as a black week. Apart from the cryptopolygon (MATIC), the prices of the 20 best cryptos have all fallen. The Bitcoin price even hit a low of around € 27,000, which had not happened since January 2021. On Wednesday, May 19, 2021, Bloomberg’s Galaxy Crypto Index fell 19.1%, the first in a year. But on closer inspection, this cryptocurrency could look like one cryptocurrency victory…
Good or bad week for cryptocurrency? It all depends on the type of investor!
It is well known that the crypto audience can be divided into two categories. While the border is not necessarily waterproof, there really is two different profiles of crypto investors.
Dark week for cryptocurrency speculation
On the one hand, you have crypto buyers who see e-money as one get rich quick. In fact, the prices of cryptocurrencies are very volatile. Each week, the news thus evokes one or more cryptocurrencies that have seen their price jump in an incredible way. With exceptions, such performance is not possible in the traditional stock market or, for example, FOREX.
In search of quick gains, these investors expect simplicity. Therefore, they mainly use commercial centralized exchanges such as Binance, Bitbuy, Coinbase, eToro, etc.
For this type of investor, the dark week with crypto has been experienced as a disaster. In fact, many lost their winnings, which led some to resell in disaster their cryptocurrencies.
Good news for crypto investors who are good at decentralization
The second segment of crypto-aficionados consists of individuals who are sensitive tothe ambition of cryptocurrencies to change the current financial system. The motivations can be several. They may be disappointed investors, lose confidence or just want to dust off a banking system that is showing more and more mistakes. Either way, crypto finds a real audience in these people. Most cryptocurrencies run on blockchain technology. This allows them to perform transactions in a decentralized way, ie. without a bank intermediary.
But crypto goes much further in decentralization with DeFi or decentralized economy. DeFi refers to a set of applications that allow you to take advantage of traditional (mainly financial) services in a decentralized way. It can be a cash loan, a paid savings plan, crypto exchanges or fiat money, etc. Mainly powered by the Ethereum blockchain, DeFi is enjoying incredible success. For crypto investors capable of DeFi, the past week has not necessarily been bad. It is even a bearer of hope.
DeFi’s victory over centralized finance
As with many things, there are numerous reading grids to interpret the recent crash in cryptocurrencies. At first glance, the fall in prices could be seen as a leap back in crypto. Some skeptics even rejoice at the thought of seeing the crypto bubble finally burst. But on closer inspection, decentralized crypto appears stronger.
Centralized crypto exchanges in trouble
The crash in crypto prices this week has prompted many investors to sell their crypto assets. The number of transactions increased drastically, especially on Wednesday, May 19, 2021. Faced with high demand, many classical exchanges could not keep up and had to close.
Thus, most centralized exchanges have faced delays and many technical problems. E.g, Coinbase and Binance were not available a time on Wednesday. Binance, the world’s leading crypto exchange, has temporarily suspended Ethereum liquidations due to an overheated network. Binance and Coinbase registered one explosion in the number of technical problems reported by users, especially on Wednesday between 16.00 and 19.00.
These technical limitations have led many to openly condemn the immaturity of the crypto market. This rather hasty judgment would be tantamount to forgetting the main aspect of crypto, namely decentralized financing.
The robustness of decentralized crypto applications
While the “institutional” exchanges were in full swing, it is clear that decentralized exchanges have held up ! Uniswap is a good example of this. At present, Uniswap is the 6th DeFi application when it comes to managed funds. It’s a crypto exchange like Binance, except there’s no middleman. The exchanges take place thanks to its own funds, which consist of more than 72,000 LP (liquidity pools), financed by the users themselves. In this one is called Uniswap decentralized crypto exchange platform. But by the way, how did Uniswap react to the cryptocurrency hole?
It is very interesting to note that Uniswap has done much better than its centralized counterparts. Thus, on Wednesday, May 19, 2021, Uniswap was able to execute a transaction volume equivalent to $ 6.3 billion.
This observation is not only due to Uniswap. Other DeFi crypto services like Compound, Polygon (MATIC), AAVE or Maker, have worked without encountering any technical issues. In total, these DeFi applications were able to process a volume of positions of $ 9.11 billion! Spread the word, decentralized crypto scored a big hit this week !
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If you want to learn more about Bitcoin and invest in cryptocurrencies, here are two perfect books: “Understanding Bitcoin in 2 Hours” and “Investing in Bitcoin”.
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