Both BTC and ETH strengthened last week, each setting new highs in the past two years, becoming the focus of the market. Bitcoin reached $15,985 per coin on the morning of November 6, which was close to $16,000 per coin; ETH rose for three consecutive days, surpassing Bitcoin, and reached a maximum of $468 per coin.
The mainstream currency sucks blood, and DeFi has become the hardest hit area. Contrary to the strong market of BTC and ETH, DeFi projects generally fell last week. Most DeFi tokens fell by more than 20% within 24 hours. Among them, the market value of DeFi star project yearn.finance became a landmark event. The project’s token YFI was 11 It fell below $8,000/piece on the 5th.
But after November 6, as BTC and ETH’s upsurge was blocked, DeFi began to recover. According to Coingecko data, several projects have rebounded rapidly in the past 7 days, rising by more than 50%. YFI repaired upwards and returned to the price level in early October.
DeFi or the second spring? Judging from the rebound data, the style of the market is changing.
(Screenshot from coingecko data on November 11)
DeFi’s second spring tilts toward the head project
The strong and weak relationship between BTC/ETH and DeFi was widely discussed last week. Due to the strong BTC/ETH market, DeFi was once looked down upon on social networks.
Steven, the co-founder of Qianfeng Capital and the head of Alpha strategy, told Babbitt that there is no absolute positive and negative correlation between BTC and DeFi. “This time, BTC soared directly from $10,000 to $15,000 in the’exact bull market’. The total amount of funds in the market has not reached the $500 billion corresponding to Bitcoin at this price at the end of 2017. We have fluctuated for too long at the current market value level, and we are still stuck in the game of stock funds, so it will be obvious to everyone I feel that BTC and DeFi are ebb and flow. Strictly speaking, they do not have such an absolute relationship. Throughout history, BTC and other tokens have a relatively obvious positive correlation. At present, this positive correlation has weakened.”
Some of DeFi’s top projects began to rebound on November 6, and YFI’s reversal performance has been particularly concerned recently. Coingecko data shows that YFI fell below $8,000 per piece on November 5, a record low. The total market value evaporated more than half within 30 days, but it rebounded sharply the next day, rising nearly 100% within 24 hours. Another iconic project is Uniswap, the leader in the DEX field, which hit a record low of US$1.79 per piece on November 5, and began to rebound the next day, with a 24-hour increase of nearly 50%.
In an interview with Babbitt, Zhou Zhiqiang, partner of Youzheng Liantong, pointed out that most of the recent projects with large returns are mainstream projects. “The top projects have the largest callback. These projects have a market value of between US$100-800 million and have common features. It has good fundamentals and solid products. Whether it is user usage or TVL and other indicators, it is in a leading position in their respective subdivisions.”
Steven said that the fundamentals of the DeFi market are not as pessimistic as everyone imagined. “From a technical point of view, most of defi’s projects are technically oversold, and even a retaliatory rebound is also a normal market behavior. The biggest reason is that the fundamentals of many projects have not deteriorated, such as going to MarkerDao. Under the influence of the bear market, more and more people are willing to go to Maker to mortgage assets to synthesize Multiple Dai. TVL is now over 2 billion. Another example is Aave, which is a lending business. The loan balance remains high during the bear market and the yield remains at the previous level. ; Uniswap in the DEX field, its trading volume is comparable to that of the centralized exchange Coinbase. Now the market is more mature, and it has once again entered the cycle of good coins expelling bad coins. You can see that this round of rising is Uni, AAVE , SNX, REN and other high-quality assets, the funds are more concentrated in these projects that were actually well developed before the last wave of bull market.”
Will the market outlook continue to continue the preferred style of DeFi leaders?
Steven is optimistic about this. Zhou Zhiqiang believes that the trend of the market outlook needs to consider the hype of “Amber”. “The value of DeFi depends on three layers. The innermost layer, that is, the first layer, is the true value of DeFi products. The ability to make money, and whether profits are used to distribute dividends and repurchase to provide support for the price of Token; the second layer is business expectations, that is, users’ expectations of the scale of the product’s business; the third layer is Amber’s consensus. As a member of the large family of encrypted digital currencies, DeFi Governance Token also bears a certain “amber mark”. Many users buy DeFi Token because they do not see the value of its products clearly, nor do they have expectations for its business. It is simply because the governance currency is a hot currency in the market, it invests funds to catch up. At present, the Amber Consensus still has a greater impact on the DeFi Token, especially when the short-term hype boom occurs, the Amber Consensus is in the defi coin In the long term, with the expansion of the real value layer of Defi projects and the tokenization of more and more physical assets on the chain, everyone will change their prejudice against’coins’ instead of investing The target is’coin’, and it has too high expectations of getting rich. In the end, investors’ investment decisions will return to the value layer and business expectations.”
According to Zhou Zhiqiang’s DeFi three-tier value theory, both DeFi and Bitcoin’s third-tier prices are derived from Amber Consensus. Therefore, the rise in Bitcoin represents an increase in the hype sentiment of Amber as a whole, which will drive DeFi to rise to a certain extent.
(Three-tier value diagram provided by Zhou Zhiqiang)
The judgment project needs to be determined according to the business. TVL is still an effective macro indicator
The rebound of mainstream DeFi projects has driven the total market value of DeFi assets to rise, while TVL (total value of locked positions) has been steadily increasing when prices in the secondary market of DeFi projects fluctuate sharply. TVL was previously widely regarded as an important indicator of the fundamentals of the DeFi market. Before this, the total market value of TVL and DeFi assets once deviated, which caused the market to question the indicator of TVL.
Steven said that TVL essentially cannot determine the profitability of a project, let alone the market value of a project, so it is normal for TVL and market value to move differently. “In our opinion, TVL can reflect the popularity of a project in a short time. For example, when Sushi first came out, it took away nearly 70% of Uniswap’s TVL, but did it take away nearly 70% of Uniswap’s long-term value? I don’t see it at the moment. In essence, it still has to return to the project’s own innovation and whether there are real users. The retained function.”
Zhou Zhiqiang believes that if you look at the DeFi market from a macro perspective, TVL is still one of the effective and important indicators, but it is not applicable to the micro level. “From a micro level, TVL has different meanings for different DeFi subdivisions. For example, lending, TVL does not reflect the true commercial profit of the product, because some products have very high lending rates, and it seems that TVL is not very high, but In fact, users can borrow money to bring greater value to the product. Another example is insurance. The higher the TVL, the stronger the insurance product’s underwriting capacity, which is closely related to the business. For DEX, the meaning of TVL lies in transaction depth. It only represents the quality of the product it can provide, not the level of profitability of the product. From a macro perspective, TVL is still a very good indicator, although we can see that some tracks use TVL to judge its development is not accurate. Some tracks are accurate. If the development of the market is expressed by two indicators, one is TVL and the other is an indicator that is not covered by TVL. The combination of these two indicators represents the overall development of the market. When TVL rises At that time, we can naturally think that the other indicator will also grow simultaneously. When the two indicators are combined, we will find that the overall market is also growing.”
In addition to the total market value of DeFi assets, the total transaction volume of TVL and DeFi is not completely synchronized. Steven believes that it is precisely helping investors to screen the real needs and fake needs of the project.
“For example, CRV, BAL, the transaction volume of these projects has plummeted by 80% or 90%, because these two projects are very dependent on the development of other DeFi projects. When the revenue building blocks collapse, the tokens of these projects lose their liquid value. And Uniswap will not , Uniswap’s transaction volume has been stable at US$200-300 million for a long time, and the number of active users has also maintained a high level of about 30,000. Only these core user assets and real transaction volume can truly reflect the value of the project, which can be seen as a cryptocurrency transaction The true value of the decentralized solution.” Steven said.
ETH2.0 may impact part of DeFi business logic, current progress is not as expected
The market generally believes that ETH2.0 is becoming clearer, which will benefit DeFi.
The official Ethereum team officially launched the deposit contract on November 5 and released the ETH2.0 specification v1.0. It plans to open the genesis block on December 1, which means that ETH2.0 is on the line.
EHT soared, and DeFi followed.
Based on this, Zhou Zhiqiang pointed out that with the increase in the types of DeFi assets, ETH, as one of the many assets, has a weakening impact on the total assets on DeFi. “The components of DeFi are now more and more complex. From the overall perspective Look, ETH 2.0 will definitely bring better performance and benefit the DeFi industry as a whole, but each track must be looked at one by one. For example, the drop in operating fees will directly impact the existing Gathering of Finance projects, because Gathering of Finance is an attractive point It is for everyone to share the cost of mining procedures. In addition, ETH2.0 may give rise to a new competitive landscape in some tracks. After all, the current leading DeFi products are adapted to the design of ETH1.0, which is better in 2.0. New DeFi innovative species are likely to appear in the environment, and they will directly challenge the current’challenger’.”
Steven has reservations about the arrival of ETH2.0 because the current progress is not as expected. According to the official setting, there are more than 16,000 independent nodes and pledged more than 500,000 ETH by December 2nd, and ETH’s POW mechanism is running In 6 years, it has grown to only 4478 now. “It is now less than 20 days before December 2. I believe that in the first half of next year at the latest, ETH can start Phase 0 of POS and kick off the prelude of ETH 2.0. For DeFi, more users may be injected due to the reduction in Gsa fees, and DeFi can also begin to get involved in many instant business scenarios and inject new business logic. For Defi, the future challenge is to meet greater challenges When it comes to the customer base, does the project’s carrying capacity match the growth rate of the user scale? This requires each project to design a more commercial product architecture and design a larger business scenario, which will also increase the Matthew effect. The advantages and disadvantages of projects will be infinitely magnified in a more commercial environment, and projects with insufficient innovation and poor user experience will be more difficult to survive and to raise funds.”
