Can Synthetix (SNX) Extend DeFi Rallies

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Synthetix (SNX) is the next DeFi asset to post outsized gains in the past few days. SNX is up more than 21% on Monday, boosted by the overall market recovery. The asset trades at $13.69, doubling its price in the past month. 

SNX is yet to recover its absolute peak around $25, but there are signs of the making of another “DeFi Summer”, similar to the rise of DeFi in 2020. SNX is currently rallying alongside most trading platforms and lending protocols. 

Synthetix to Add Second Layer Trading

The triggering event for the latest SNX rally is the expected launch its entire DeFi protocol on the second-layer Optimistic Ethereum network. The launch, scheduled for July 26, will turn Synthetix into another faster and cheaper solution to DeFi operations, similar to Polygon (MATIC), Polkadot (DOT) and Harmony Protocol (ONE).

The final deployment of synthetic assets on the network will be voted in by the Spartan Council, a small group of elected representatives to the community. 

The Optimistic Ethereum main net has been open since the start of 2021, but the first synthetic assets and the exact DeFi ratios will be tweaked over time. 

Synthetix will use Chainlink (LINK) oracle data to establish the price of big ticket coins. The protocol will start with three synthetic assets, to represent ETH, BTC and LINK. 

The launch of Synthetix decentralized trading itself may boost market prices. In the future, the project will add new synthetic assets and offer decentralized shorting and futures trading. Unlike Uniswap and SushiSwap, Synthetix wants to concentrate on derivatives trading and collect a significant liquidity pool. New assets will be added after a community vote. 

As of July 2021, Synthetix claims it is locking in more than $1.3B in liquidity through various forms of staking. SNX is already available for staking and receiving weekly rewards. 

Is SNX a Good Investment

SNX remains extremely volatile, and has lost up to 75% during the May and June sell-off. However, the asset has a promising side, as nearly half of its supply is out of circulation. There will only ever be about 215M SNX, of which about 115M are in circulation. 

With this supply, SNX can hope for value growth if its network usage increases. The other boost comes from the overall interest in DeFi. 

SNX is also relatively liquid, available for Binance trading, as well as accessible through Coinbase. Those listings may tap retail interest and spark active trading in some of the most popular pairs.

What is the Best SNX Wallet

SNX still exists as an ERC-20 token, which will be compatible with Optimistic Ethereum. The token can be held in multiple wallets, including hardware wallets like Ledger and Trezor. 

SNX is also accessible through MyEtherWallet, as well as the multi-asset Atomic wallet. The SNX staking protocol has an online escrow holding mechanism to allow staking. 

What is Optimistic Ethereum

Optimistic Ethereum is a Layer 2 scaling solution that only occasionally uses the main Ethereum network to keep record. The network uses the Optimistic Rollup technology, which records all transactions on chain, but performs computations such as smart contracts off-chain to save on gas fees. 

The Optimistic Ethereum network is an open stack that has the potential to be used by other DeFi startups. It was created by the Optimism startup with the mission of opening up the Ethereum ecosystem to all users. The Optimistic Ethereum network aims for instant transactions and scalable smart contract building. 

One of the big bottlenecks for DeFi were gas costs, which at one point only allowed large-scale players to participate and kept retail investors out. The Optimistic Ethereum network may also be used by The Graph (GRT) protocol.

Is DeFi Summer 2.0 Coming?

DeFi based on Ethereum remains relatively stable, holding about $55B in value. This is mostly due to the stagnant price of ETH, which hovers below $2,200. 

Binance Smart Chain is also growing its Total Value Locked, to above $22B. The number gets a boost from the price of Binance Coin (BNB), which is up more than 10% this past week and trades above $330 once again. The rise in DeFi-related assets for now offsets the slower performance of some of the most popular altcoins. BTC prices also dominate about 44.5% of the market, as interest shifts to hotter assets.

As BTC looks like trading in a range between $30,000 and $35,000, DeFi tokens are a source of more rapid growth. The price of DeFi projects continues to defy the overall market sentiment, and post higher gains. Platform-related tokens usually get the biggest boost, as well as CAKE and UNI, the native tokens of the leading decentralized exchanges. 

DeFi tokens, however, are highly volatile. Their estimated notional value is a total of above $82B. But those tokens trade on daily volumes of around $5B, a relatively small market. Of that market, top tokens take up the bulk of trades while smaller assets remain illiquid.

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