DeFi tokens are falling faster than the overall market, hinting that the bubble may have already burst
Bitcoin may be holding its ground, but nearly all DeFi-related tokens are struggling at the moment, leading some industry analysts to believe the bubble has burst. Since its all-time high last month, the total value locked across all DeFi platforms has fallen by almost 10%. The crypto market is certainly cooling off, but DeFi appears to be freezing as token prices plummet.
Is the DeFi market declining?
During the first week of several months, no new DeFi tokens are hyped, no smart contract breaches, no influencer or exchange shills, and no new pump token. Some of the previously pumped DeFi tokens are down more than 90 percent from their all-time highs.
Industry expert and founder of Nuggets News, Alex Saunders, recently expressed the importance of profit-taking when trading, adding: DeFi is a bubble.
On Sept 2nd I shared the following:
“In case I haven’t been clear. TAKE PROFITS. I most certainly have been. #DeFi is a bubble. There are now multiple protocols that have crossed the chasm from yield farming to ponzi economics”$ETH hit $480 top that day. Were you greedy? 💎⤴️🚨 pic.twitter.com/zSnCKJInfE
— Alex Saunders 🇦🇺👨🔬 (@AlexSaundersAU) October 8, 2020
Short-term shifts and returns are all that matters. Those who are holding DeFi tokens for a long time are likely to be affected. For example, SUSHI has fallen 94% since its all-time high, and the price chart is the same as most altcoins from 2017 to 2018. Tokens from Curve, Swerve, and bZx are also down massively from their levels peaks, while the Uniswap token has fallen by more than 60%.
Speaking at the LA Blockchain Summit, FTX CEO and SushiSwap savior Sam Bankman-Fried questioned DEX volume. He commented that as soon as oversized incentives like liquidity mining disappeared, so did volume.
It seems that DeFi is driven by the crowd looking for quick returns rather than investors and HODLer looking for long-term growth. With that in mind, the bubble story became more applicable.
So, what will the future of the market be?
This year has made it clear that there is a huge demand for DeFi in the market, apart from productive farming and fast money-making. The world’s traditional financial system is on the verge of collapse, with nations scrambling to devalue their currencies to control the mountains of debt they’ve created.
Becoming your own bank is a compelling concept, and DeFi is only just taking the first steps of the potentially long journey. ETH 2.0 will eventually aim to revolutionize the industry that has gained a lot of traction in such a short span of time.
Newer regulations will likely be used to metaphorically classify wheat and remove negative aspects of DeFi such as copying, carpet pulling, arbitrage schemes, flawed smart contracts, and fraudulent projects.
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