MetalSwap Knowledge: Halving Impact in DeFi Market

Metalswap Knowledge [BLOG]-Apr-16-2024-03-46-54-1589-PM

The Bitcoin halving is just a few days away and through this mini-series we have delved into most topics related to this special event.

In the last episode, we focused on studying and creating some strategies regarding the altcoin world and a potential altseason, analyzing both the bull case and the bear case for an asset like OP.

In this concluding article of the Bitcoin halving series, we will finally analyze the impact that this event will have on the entire DeFi ecosystem, focusing especially on terms of volumes and general activity in the months following the halving date.

Volumes and Users Post-Halving

The first metric that allows us to have a general view of the state of DeFi usage is undoubtedly GWEI, which is the cost of transaction fees on the Ethereum blockchain.

As the DeFi is basically developed only on the Ethereum mainnet and all the different layer 2 like Optimism and Linea, the GWEI it’s a perfect expression of the general usage of the DeFi.

The higher the GWEI, the higher the number of users utilizing the blockchain and therefore, the higher the trading volumes.

As we all know, the last Bitcoin halving was in May 2020; as we can see from the chart, there was a general increase in the cost of GWEI in the weeks following the halving, indicating that there was increased usage of DeFi.

GWEI then remained high for the rest of 2021 and part of 2022, during the last bull market.

So, can we then expect an increase in the number of users and usage of DeFi in the weeks and months following the next halving?

Looking at the past, yes!

Volatility Index analysis

Greater overall activity in the network almost always translates into greater volatility in the market.

Indeed, while the bear market is a time when general volatility decreases, in the bull market, it increases, raising the risks of operating in DeFi.

But let's analyze this chart showing the price volatility of ETH:

As we can see, the last few months have seen relatively low volatility, but if we look back to 2020 and 2021, we see that peaks of over 200 points were reached.

This shows us, with data in hand, that the bull market, usually coming in the months after the BTC halving, is the most volatile period of the entire crypto cycle and therefore the period where it might be most advantageous to open positions that remove the volatility, thanks to MetalSwap's Hedging Contracts.

Volume Spike After the Halving

Last but not least, it is important to also analyze the volume metric traded within DeFi to see how the halving influences its growth.

The following chart shows us the trading volumes of major DEXs in DeFi on a monthly basis:

As one might expect, an all-time high in terms of volumes was reached in May 2021, during the last bull market and one year after the halving.

Given the old data, it's reasonable to also expect a volume increase in the next couple of months.

Stay Safe, Stay MetalSwap

According to the data we've analyzed, a lot of new volumes and volatility are about to enter the DeFi world.

If you are a long-term holder and feel uncomfortable about the coming market volatility, MetalSwap offers you a solution.

By opening hedging positions on one of the available assets within the dApp, you can either completely eliminate or significantly mitigate the volatility of your portfolio.

If instead you are a speculative user, MetalSwap gives you the possibility to take advantage of the future prices of assets, with both long and short positions, all without paying any funding rate.

Share your strategies within the official Discord channel!


-The DeFi Foundation


✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with Digital Assets and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.