In brief

  • Altcoins saw a huge increase in trading volumes in Q3, according to eToro's quarterly report.
  • Ethereum-based decentralized finance platforms played a big role in this growth.
  • DeFi may be on track to reach the levels of the 2017 initial coin offerings craze.

Social trading platform eToro saw a big shift towards altcoin trading in Q3 2020, while Bitcoin (BTC) lost nearly 40% of global trading volume on the exchange, according to its quarterly report published on October 14.

Per the report, quarterly global altcoin trading volumes grew significantly across the board. For example, among eToro’s top-10 cryptos, Binance Coin (BNB) and Tezos (XTZ) were traded 46% and 37% more in Q3, respectively. While still positive, this is actually the lowest result among the top coins.

Trading volumes of Ethereum (ETH) and Cardano (ADA) both increased by roughly 90% on eToro in Q3. In their turn, Tron (TRX), NEO and EOS global trading volumes surged by 203%, 153% and 175%, respectively. In comparison, Bitcoin is the only crypto in eToro’s top 10 that saw a decline in its global trading volume, losing 38%.

Altcoins saw a huge increase in their trading volumes in Q3. Image: eToro

Among eToro’s US-based customers, the trend was largely the same. While Bitcoin trading volume increased by 17%, most altcoins overtook the first cryptocurrency by far, with most of them gaining up to and even over 200% in trading volumes.

Such a surge occurred largely due to the skyrocketing popularity of DeFi projects, which also gave Ethereum a huge boost along the way.

“Decentralized Finance (DeFi)'s continuing rise to prominence played a huge role in the surge of altcoins and ethereum, with returns in many instances approaching levels last seen during the 2017 ICO [Initial Coin Offering] boom,” explained Guy Hirsch, managing director at eToro USA.

The researchers noted that all Ethereum-based decentralized applications—including DeFi—require ETH at some level to operate. And since ETH “cannot be economically abstracted away,” this became “a critical aspect of the ETH value proposition.”

“Over 7.5% of ETH’s total supply is currently locked in DeFi. This number was only at 2.7% at the beginning of 2020. This shows a growing interest for Ethereum’s use cases and tells us that investors are becoming more confident about using ETH as collateral. In theory, this would mean that there is less ETH to sell on the market,” said the report.

The increase in DeFi’s popularity has also played a major role in bringing new retail investors into the crypto sphere over the past months, contributing to the adoption of cryptocurrencies in general.

“While Q2 2020 featured iterative infrastructure improvements and signs of emerging institutional support, Q3 reminded us that crypto is still a retail dominated industry. DeFi, yield farming, NFT’s, and altcoin rallies were the commanding narratives in Q3, even though MicroStrategy’s $425M investment in Bitcoin was certainly a highlight,” said Joshua Frank, CEO of digital assets data provider The TIE.

He also compared DeFi to the 2017 ICO craze, although with a disclaimer that DeFi’s scale is not quite as large—yet.