Decentralized Finance (DeFi): Price Liquidity, Market Efficiency on Prices

Abstract

Decentralized Finance (DeFi) is a blockchain-based financial system that utilizes smart contracts to increase efficiency and transparency, while overcoming the limitations of conventional financial systems. In Indonesia, there is still little research on blockchain, especially on the DeFi, so investors have very little information. The lack of previous research on the DeFi in Indonesia creates a knowledge gap, given that the local DeFi market has unique characteristics influenced by investor preferences, evolving regulations, and specific levels of technology adoption. Cryptocurrency prices, including the DeFi, are influenced by public information that reflects market efficiency. For example, on October 10, 2020, the price of Yearn Finance (YFI) increased 36% following the rise in Bitcoin prices, demonstrating the link between information, transaction volume, and fluctuations in the DeFi market value. This research aims to identify the factors that influence the DeFi price changes, focusing on the influence of price liquidity and market efficiency. Using a quantitative approach, 65 DeFi coins were selected through purposive sampling, and analysis was carried out using multiple regression using EViews 13. The research results show that partially, price liquidity and market efficiency do not have a significant effect on the DeFi price changes. However, simultaneously, these two variables have a significant effect, with a contribution to price changes of 54.521%. The insignificance of the influence of market efficiency on the DeFi prices suggests that regulations focused on improving efficiency may not be enough to control price volatility or promote price stability in the DeFi ecosystem.