Why are Oracle tokens like Chainlink lagging behind when Defi slows down?

October is pretty good for most of the coins on the market Oracle . Bitcoin has made an all-time high this month, while Ethereum and other large caps are making higher highs on their respective charts.

Oracle coins have not performed as well, however, despite the general bullish sentiment in the market. They have been lagging behind for some time. In fact, the price charts of these coins are mostly red at the time of writing.

Why so?

In the January-February period earlier this year, DeFi was one of the main drivers of the bull market. Most of the tokens from the DeFi range are valued and this period is basically called DeFi summer.

A fascinating trend that was noticed at the time was that with the use of more decentralized protocols, the space began to look for reliable data providers. Basically, the oracles did the job.

Decentralized applications based on smart contracts require a real information feed that smart contracts cannot access independently due to blockchain restrictions. Hence, oracles intend to solve a similar problem by connecting the online world to off-chain information sources. In short, an oracle is the layer that outputs, verifies and authenticates external data sources, and then forwards that information.

The DeFi space has generally not performed well so far. Hence, at this stage, the oracle sign suffers from this gloom.

DeFi-Oracle Correlation

The most famous oracle project in space is Chainlink. Chainlink’s price feed is slowly becoming the oracle of prices, which are used, among other things, to determine loan interest rates and to calculate mortgage interest rates. In fact, this alt has the first advantage compared to other oracle-focused coins / tokens.

So, for ease of analysis, let’s compare LINK’s growth and performance to the performance of the broader DeFi market.

During the two-month period from January 1 to March 1 of this year, the Total Value Locked (TVL) on DeFi doubled. During the same period, the price of LINK rose by 155%. In contrast, between September and now, when TVL began to fall, even the price of LINK went through corrections.

The interdependence thus increases over time.

Source: DeFiPulse

When the number of DeFi addresses began to rise earlier this year, Chainlink addresses also saw an upward curve. Interestingly, the shapes of both curves are quite similar – an indication of their development together.

Defi addresses in total. Source: dune analysis

LINK address. Source: Glassnode

Oracl has become a vital part of the infrastructure for the DeFi space, and it is clear that they add value through staking, governance, and interoperability. Therefore, if DeFi does well, oracle tokens can certainly move up much faster on their respective price charts.

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Annie

According to Ambcrypto

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