DeFi season could be over as Bitcoin and Ether pack bags for the moon

With Bitcoin price successfully punching through the $12,000 barrier after PayPal announced that it would be venturing into digital assets, October is delivering on the excitement that September failed to provide. And with on-chain and market data continuing bullish signs for Bitcoin (BTC), experts believe that a 2017-style rally may be on the way.

Ether (ETH) price has also picked up, although confidence in decentralized finance is beginning to shake as the industry’s growth and hype are slowing down. DeFi has been the major kick-starter for cryptocurrency popularity in 2020, but now, other digital assets seem to be ready to start thriving and could reach considerable heights by the end of the year.

What about Bitcoin?

According to a recent report by Finder — an online comparison resource — featuring 30 experts from the industry, Bitcoin’s price is likely to reach $14,283 by the end of the year. And according to Finder’s cryptocurrency editor, Andrew Munro, Bitcoin’s reputation as a reliable store of value is the main reason behind the generally bullish outlook. He told Cointelegraph:

“Many panellists noted that BTC is increasingly finding a place in traditional portfolios and is being bought by both institutional and retail investors as a hedge against inflation. Given the unprecedented quantitative easing efforts by central banks around the world some panellists speculated that BTC would become a widely adopted ‘store of value’ asset.”

Other experts have cited numerous reasons for a rally in the price of Bitcoin, namely an increasingly clear regulatory framework in the digital asset market and the many setbacks associated with fiat currencies, such as inflation and negative rates.

While the panel average predicted a $14,283 Bitcoin price by the end of the year, other predictions point to a much higher price tag, especially considering the famous stock-to-flow model created by anonymous analyst PlanB.

Can Ethereum keep up?

While Bitcoin is beginning to show signs of strength over other cryptocurrencies, with increasing trade and market capitalization dominance, industry participants also hold a positive outlook on Ether, with a panelist average of $513, a 40% increase by the end of the year. However, in the long term, experts are not so sure about Ether’s sustainability. Munro said: “The most commonly cited factor behind bullish near-term Ethereum predictions was the expected launch of Ethereum 2.0 before the end of the year, and the impact of staking on circulating supply.”

Ethereum has seen increased popularity throughout 2020 due to the rise of DeFi, but some skepticism is being voiced over the long-term prospect and sustainability of DeFi. While many are hoping for the launch of Ethereum 2.0, that may take years to finalize. According to Jonathan Hobbs, author of The Crypto Portfolio and a former digital asset fund manager, told Cointelegraph that it’s one of the reasons for the positive returns on Bitcoin:

“Defi plays got overly speculative earlier this year, as they often do in this industry. We can see some of those flows now moving back towards bitcoin, with bitcoin dominance trending upwards post the DeFi sell-off.”

DeFi losing power

As profits from the DeFi alt season trickle back into Bitcoin, the long-term sustainability of decentralized finance may come into question. In fact, a survey by CryptoCompare asked 26 exchange operators in leading trading venues about the future of decentralized exchanges, with only 7.7% finding it likely that DEXs will overtake centralized exchanges in two years’ time.

It is clear that DeFi activity is slowing down, but some believe this is actually good in the long run. Lanre Jonathan Ige, a researcher at Amun AG — an issuer of cryptocurrency exchange-traded products in Europe — told Cointelegraph:

“The mellowing in immediate hype for DeFi will be disappointing for the short-term trader but is likely good overall for the industry. The bubble over the summer was not sustainable but did show that various aspects of DeFi (lending, trading, DAOs) are actually useful for particular use cases.”

While sustainability seems to be the main blocker for any long-term success of decentralized finance, both when it comes to the returns on DeFi and to the technical aspects of Ethereum, others have cited a shady crypto industry, complicated interfaces and a general lack of popularity as deterrents to the continued growth of DeFi. Munro stated: “73% of the panel said ‘scams, excessive hype and market manipulation’ were a key obstacle to DeFi growth, and some likened DeFi to the ICO boom in 2017.”

Nevertheless, many remain hopeful about DeFi. In fact, the majority of panelists in Finder’s cryptocurrency report said DeFi applications will likely continue to steadily grow over the next 12 months in terms of value locked and the number of users. Ilya Abugov, lead analyst at DappRadar also believes this to be the case, telling Cointelegraph: “There is less media hype in DeFi right now. There was a lot of buildup in the summer, so now there is a bit of a sobering up moment.”

Institutional interest picking up

While DeFi may have been the catalyst for the summer’s crypto activity, institutional interest may be the driving force for Bitcoin going forward, according to Lanre, especially because big corporations such as MicroStrategy, Stone Ridge and Square are now getting involved,

Exchange operators queried in the CryptoCompare survey believe this to be the case as well, with 92.3% stating that there will be a rise in institutional investment in digital assets in the next two years. According to Hobbs, Bitcoin’s scarcity and deflationary nature are some of the factors influencing why institutions are becoming interested in digital asset investment: “Ninety percent of the world’s bitcoin has already been mined. Ninety percent of the world’s dollars, however, have definitely not been printed. I believe this narrative is starting to catch on more with institutional players.”

In the meantime, some institutions are still betting on the DeFi sector, with Pantera Capital recently disclosing during a webinar that DeFi will be at the center of the upcoming bull rally. But while many still believe in DeFi, most seem to think that the DeFi price hype cycle is done and that slower growth for the industry will follow, especially as Ethereum is able to scale.

While the outlook is generally positive, many are still concerned with the latest news pertaining to regulation, such as the United States’ lawsuit against BitMex and the United Kingdom Financial Conduct Authority’s ban on cryptocurrency derivatives for retail. Will more regulatory constraints follow, or is it clear sailing for Bitcoin and crypto from now on?