In brief

  • Binance's Composite DeFi Index has fallen by over 50% in just a month since its launch.
  • This is a result of the decline in the prices of DeFi tokens that comprise its basket.
  • This downtrend may continue in the foreseeable future, some experts say.

The prices of top decentralized finance (DeFi) tokens have declined significantly over the last month. The DeFi Composite Index, launched by major crypto exchange Binance in late August, has fallen by over 50% since its inception.

The DeFi downtrend continues. Image: Binance

According to Binance, the index is calculated using weighted averages of a DeFi tokens basket and tracks the market performance. It includes lending platform Compound’s COMP, DeFi darling yearn.finance’s YFI, Band Protocol’s BAND and other popular DeFi tokens.

Initially, the index reached a peak value of $1,189 but has now fallen to its current price of $515—due to a decline in the prices of its underlying coins.

DeFi’s decline, which began in mid-September, has continued over the past week, according to crypto analytics platform CoinGecko. High-profile projects such as Cream (CREAM), yearn.finance (YFI), Sushi (SUSHI), Uniswap (UNI) and Curve (CRV) remain in a downtrend and have each lost roughly 27% to 55% of their value over the past week.

Some top DeFi tokens saw a sharp decline over the past week. Image: CoinGecko

Commenting on the behavior of YFI, which peaked above $43,600 in the past and is now trading at roughly $18,000, The Block’s analyst Larry Cermak noted that its future is currently unclear, partly because there are not enough people willing to buy YFI at such prices.

“I think that’s part of it but my hypothesis is that it is because yield is dropping and with the lack of market buyers, it’s not clear when it will return in strength,” Cermak tweeted yesterday, adding, “Therefore most metrics that people watch for yearn are down in recent weeks and morale of holders is low.”

Analyst Johnny Mo also pointed out that YFI charts are not looking promising for the foreseeable future. He expects the price to fall towards “at least [the] $10,000 range,” adding that YFI’s horizontal support is only at the $6,000 level.

On the other hand, Alex Svanevik, CEO of analytics platform Nansen, expressed confidence in the DeFi industry, saying that it will ultimately emerge victorious thanks to its low entry barriers. 

“Fintech companies spend half their time asking for permission from the incumbents. Meanwhile, DeFi teams can innovate,” he added.

But that won’t affect the prices in the short term.