With the value of funds locked in DeFi almost quadrupling in less than two months, the community is debating whether DeFi is in a bubble
Flash loans worth over $ 138 million were released through the DeFi Aave application earlier this week, recording an all-time new high for the emerging financial instrument. Flash loans allow users to make large loans without collateral, provided that they operate on the chain for a profit, and all operations can be completed in one block.
Aave currently issues more than $ 100 million in regular daily flash loans
Flash loans from Aave launched in January 2020 and have seen spectacular increases in recent weeks, with the total value of loans increased by more than 1,000% since July 1.
If the transactions are sent will be unprofitable or unable to return the loan amount, the entire transaction chain will be reversed. The profitable Aave flash loans are charged 0.09% of the interest, which is used to support the Aave protocol and provide profitability to liquidity providers that make loans possible. OK.
On July 1, the most significant loan was issued worth approximately $ 250,000. The most jumbo loan issued on July 27 was worth $ 9 million, growing 35 times within a month.
Flash loans were first introduced in 2018 by DeFi and have since become an essential component of this market.
DeFi capitalization is even less than that of Bitcoin Cash
According to the crypto market analysis firm Messari, the overall capitalization of the decentralized financial market (DeFi) is only 1.5% of the entire cryptocurrency market capitalization – totaling only $ 4.12 billion. With this number, we can see it’s even less than Bitcoin Cash (BCH).
When you zoom out as far as you can go, DeFi makes up only 1.5% of the entire crypto market.
If this chart was drawn to scale, DeFi would be even smaller than it appears here. pic.twitter.com/T7fI0HqCNH
— Ryan Watkins (@RyanWatkins_) July 28, 2020
Analyst Ryan Watkins said:
“Literal meme coin Dogecoin (DOGE) boasts a larger capitalization than every DeFi project with the exception of MakerDAO (MKR). But the small size of the DeFi sector means it still has significant room to expand, arguing that it could benefit from a reallocation of capital from the top 30 projects that are useless first-gen cryptocurrencies, ghost town ETH killers, and dead projects. DeFi doesn’t need new money flowing into crypto to continue its rise. All it needs is a reallocation of capital.”
The recent cryptocurrency market rally saw Bitcoin price rise above $ 11,000. Meanwhile, Ethereum, for the first time, exceeded $ 300 in the past 12 months. Less than two months after breaking more than $ 1 billion a second time, the value of funds locked in DeFi is currently at $ 3.7 billion, according to information from DeFi Pulse.
Read more:
- Ethereum Price Has Been Driven Higher By A Massive Influx Of Buying Pressure Seen Throughout The Past Several Days
- Developers Released The Validator Launchpad For Ethereum 2.0 On July 27, Allowing Users To Participate In The Testnet’s Proof-Of-Stake