As a seasoned analyst with over two decades of experience in traditional finance and a keen interest in the crypto space, I must admit that the recent surge in decentralized finance (DeFi) tokens has piqued my curiosity. Having witnessed the evolution of various financial instruments, I find it intriguing to see how DeFi protocols are striving to create intrinsic value for their native tokens through fee-sharing mechanisms and other innovative strategies.
Financial tokens associated with decentralized systems saw a surge of more than 30%, fueled by anticipation that the Trump administration might enhance the attractiveness of owning utility tokens, as suggested by an expert in the field.
On November 6th and 7th, UNI emerged as a significant victor, surging by more than 35% to reach a peak of $9.58 – a new record in its locale. Meanwhile, Lido DAO (LDO), Ethena (ENA), AAVE, and Maker (MKR) all recorded impressive gains exceeding 20%, according to CoinGecko data, having risen from their respective lows to highs.
Previously, DeFi tokens were often characterized as ‘governance tokens’ with little to no practical use beyond casting votes on proposed protocol modifications, according to Charlie Sherry, the head of finance and crypto market analyst at BTC Markets, in his remarks to CryptoMoon.
“However, investors and tokenholders have been buying on the bet that one day, these protocols will be able to pass value back to the token through fees earned by the protocol.”
Sherry pointed out that these “value accumulation methods” haven’t been used yet due to concerns among DeFi protocols about potential regulatory action from the Securities and Exchange Commission. She referenced the ongoing investigation of Uniswap Labs by the SEC as a clear illustration of this issue.
On November 6th, Donald Trump secured the position of U.S. President by a significant margin over Vice President Kamala Harris. This overwhelming win might lead to the resignation of SEC Chair Gary Gensler, potentially as soon as December or January, based on predictions from 10x Research.
Both of these together may have sparked a wave of “regulatory optimism,” Sherry said.
“[The] markets are now pricing in the anticipated regulatory shift, expecting a friendlier environment for DeFi projects and their tokens.”
As I delve deeper into the workings of the Aave lending and borrowing protocol, it’s clear that Sherry sees the “fee switch” proposal as a substantial milestone on the path to establishing inherent worth for AAVE token holders. In simpler terms, this change could potentially provide value directly to those who own AAVE tokens.
In the same vein, Sherry pointed out that a section of fees generated by Uniswap’s latest layer 2 Unichain will be distributed to UNI token holders. This move essentially converts UNI from a governance token into a functional asset, thereby enhancing its investment attractiveness.
According to Sherry’s observation, the decentralized finance (DeFi) systems associated with LIDO, ENA, MKR, and Frax (FXS) might also undergo comparable modifications that lead to value accumulation.
10x Research’s chief research officer, Markus Thielen, explains that DeFi tokens might have increased due to a popular trading strategy known as “buying the laggard.” This approach encourages investors to purchase assets that underperformed in the past year, with the expectation that these assets could lead the market in the coming year.
There is also speculation that BlackRock may promote its spot Ether (ETH) exchange-traded fund “more aggressively” in 2025, Thielen told CryptoMoon.
Thielen said Ether could reach $3,000 should it successfully break above the $2,700 level.
Ether is currently trading at $2,845, up 8.5% over the last 24 hours.
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2024-11-07 08:48