Despite continued turbulence in crypto markets, blue chip token Bitcoin has suffered relatively less damage and this may be the early signs of decoupling from the broader ecosystem, according to Julius Baer.
Last week, crypto markets continued to see selling pressure – especially amongst infrastructure tokens – as part of the aftermath of the collapse of stablecoin TerraUSD last month.
Leading infrastructure token Ethereum was down 10 percent while the emerging Solana network lost more than 15 percent.
«[C]onfidence in the crypto ecosystem and decentralized finance remains at historically low levels,» said a Julius Baer research note authored by the bank’s next generation research analyst Sipho Arntzen.
DeFi Confidence Loss
According to the bank, the bearish sentiment has resulted in a dramatic decrease in decentralized finance (DeFi) activity and volumes with total value locked into DeFi protocols more than halving since the start of the year.
This is the result of token withdrawals, «likely with the aim of converting to fiat currency in a flight to safety following the collapse of algorithmic stablecoin TerraUSD».
«This further exacerbates the already negative sentiment in the crypto markets resulting from the tightening of monetary policy by the world’s major central banks and the related rise of risk aversion in financial markets,» said Arntzen. «We expect no swift recovery for now.»
BTC Decoupling
Nevertheless, there is a silver lining observed in the cryptocurrencies, most notably from market leader Bitcoin which Julius Baer said is shaking off correlations with the broader market.
«Interestingly, Bitcoin has suffered less than many other infrastructure tokens and altcoins in recent days, potentially showing early indications of a decoupling from the performance of the broader ecosystem,» explained Arntzen.
«That said, we expect no swift recovery for now, neither for Bitcoin nor for digital assets overall.»
