DeFi surging despite possible VC sell pressure

As some of the largest DeFi assets rise, crypto funds are taking the opportunity to exit their positions

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During the month of July, some of the largest and oldest assets in the DeFi space have experienced significant growth. However, multiple crypto funds appear to be capitalizing on this surge to trim their positions rather than increasing them.

Index Coop’s DPI (DeFi Pulse Index), a market cap-weighted DeFi index fund, is up 25% on the month. The leading contributors to this growth are assets such as MakerDAO’s MKR, up 70% on a 30-day basis, and Synthetix’s SNX, up 38%. 

The rise comes after months — if not years — of languid price action with many top names, such as Compound’s COMP, falling as much as 95% peak-to-trough from 2021 highs. The DPI has also outperformed majors such as ETH and BTC, which are largely flat on the month. 

Much of the recent price action is attributable to traders speculating on tokenomic updates and new products from DeFi development teams. DeFi mainstays such as Curve and Aave have both launched stablecoins, while Synthetix has released a host of new products. Chainlink recently unveiled a new cross-chain interoperability protocol, and MakerDAO has begun pursuing a major strategy overhaul led by founder Rune Christensen. 

The number of new wallets and users is also on the rise for many DeFi assets. According to a Dune dashboard, Uniswap’s monthly active users are up significantly from June 2022 lows, and the number of holders for COMP, AAVE and SNX are at or near all-time highs, per Nansen data. 

Crypto funds cut positions

Despite the bullish market action and the new developments from many projects, trading firms and venture capital funds overwhelmingly appear to be selling into the DeFi bounce, according to on-chain data. 

One wallet, labeled Jump trading by Nansen, controls .5% of the AAVE circulating supply. It has offloaded 12% of that position — worth $500,000 — to an ancillary address in the past 30 days. This address in turn sends the tokens to market maker Wintermute in batches — a possible sign of over-the-counter deals. 

The same Jump addresses also appear to have offloaded 62,000 COMP tokens worth $4.3 million, and 200,000 UNI worth $11.8 million. 

The presence of venture capital selling has been most pronounced in MKR, however. Over the past month investing giant a16z has offloaded over 24,000 tokens, worth over $30 million, after the address in question first received tokens over 4 years ago. Much like Jump, an a16z address sends to intermediary wallets before sending to Coinbase, presumably to sell. 

In addition to a16z, Parafi Capital has also sent 13,000 tokens to Coinbase Custody throughout the month of July. However, earlier today they withdrew 1,300 tokens, implying at least a portion of deposits were not sold. It is impossible to tell if tokens deposited to centralized exchanges are sold.

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