Since the recent high, asset prices in the DeFi field have seen a continuous plunge. The DeFi Index Perpetual Futures Tool on FTX, which tracks a basket of DeFi assets, is down nearly 50% from the September 1 high:
Many individual tokens have even seen a further decline. For example, SRM and YFI are down by more than 65% from their prices on September 1:
Accompanying intense speculative demand and investing in extremely new tokens and platforms has contributed to many spectacular events. Moreover, during the ascent, this strategy worked for many people.
The self-described “DeFi Degens” fill up exchange orders, on-chain Ethereum transactions, “crypto tweet” feeds, and discordant channels, which are as fast as junior developers can generate new tokens. As the price of DeFi tokens rose, the price of Ethereum gas soared, clogging the network and expelling many small investors:
People who claim to be “DeFi Degens” fill up transaction orders, and Ethereum on-chain transactions and “crypto tweets” are flooded with discordant channels at a speed comparable to the speed at which junior developers generate new tokens. Let him follow the symbolic price, the Ethereum Gas price soared, clogging the network and driving many small investors out of the market.
As we saw in the 2017 1CO bubble: throwing hundreds of dollars to dozens of brand-new projects, speculators only need one or two of them to fully recover their investment. Of course, this strategy is good for speed and media attention, rather than fundamentals and sustainability.
We saw dozens of imitators who took advantage of this speculative influx. However, like the rise of 1CO, the influx of inefficient capital has also promoted the legal development of a new type of decentralized finance (DeFi). In addition, despite the collapse of many DeFi tokens, the dollar value (TVL) locked in the DeFi protocol is still close to the highest level in history.
Most of the mechanisms that lock this value are more conservative than the crazy hype mechanism that appears in the “ponzinomics” project cited by the definition. Long-term smart contracts with multiple reviews and clear use cases have been attracting funds. As mentioned in the previous article, can you also own Bitcoin and mortgage it? Many of these projects are focused on decentralized loans and market making.
The decentralized exchange Uniswap is the leading DeFi application listed on DeFiPulse by Total Value Locked (TVL), with nearly $3 billion in liquidity. Now, the exchange can facilitate transactions priced in 100 million U.S. dollars per day, a huge trading day of 2.19 billion U.S. dollars (probably due to recent Harvest Finance utilization):
Overall, this decline seems healthy for the broader digital asset space.
We have seen many suspicious projects being suppressed and merged around more reasonable and sustainable projects.
Blockchain becomes available again with lower transaction fees and confirmation time.
A large amount of funds have funded experimental development, so that many interesting financial concepts or products can be explored and tested.
