Ethereum price (ETHUSD) is little changed today, pausing a rally that saw it rise from Friday’s low of $310 to yesterday’s high of $377. The currency rally has paused even as the US dollar weakens and analysts warn of the rising trend of DeFi scams.
DeFi scams rising
For starters, Decentralised Finance (DeFi) is one of the fastest industries in the digital currencies industry. The industry allows people to develop full-scale financial organisations using blockchain. Most developers use the Ethereum network to build their DeFi systems.
The DeFi industry has grown to be worth billions of dollars. According to Santiment, the total market cap of DeFi has grown to more than $6.9 billion. That is significant growth considering that the industry was worth less than a billion dollars this year. According to DeFi Pulse, the biggest projects in the industry are Aave, Curve Finance, and Yearn Finance that are combined worth more than $2 billion.
However, analysts are warning that most of these projects are scams. Just yesterday, analysts warned of a DeFi exit scam, which could have exposed investors to losses worth more than $25 million.
In another note, Shiv Malik, a respected author of two books said that DeFi reminded him of Initial Coin Offerings (ICO). ICOs were popular scams in 2017 which led to losses worth billions of dollars. Malik issued the warning just a month after Craig Wright warned about scams in the industry.
A collapse of the DeFi industry would be a bad thing for Ethereum price because it would invalidate one of its foundations. For starters, Ethereum was developed to incorporate ideas of smart contracts, which are vital for DeFi.
So, is Ethereum a buy?
The daily chart shows that Ethereum price has been having a relief rally this week. Its price has jumped by as much as $67. The price has remained above the 100-day exponential moving average and has just moved above the 50-day EMA. It is also a few points below the 23.6% Fibonacci retracement level.
Therefore, I suspect that this relief rally will continue as bulls aim for this retracement $393. I then expect that the price will resume the downward trend and possibly retest Friday’s low of $310. On the flip side, a move above the retracement will send a signal that there are still more buyers in the market who are keen to push the price higher.
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Ethereum price technical chart
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