DeFi coins fall, is the fall of DeFi coming?
The third quarter of 2020 is over, and the DeFi boom that has been tumbling for a summer has also cooled down. The price of DeFi coins on the market has fallen. Perhaps this wave of hot spots is nearing its end.
According to data from the encrypted asset data website Messari, of the 42 DeFi assets it tracks, only three have shown positive price changes in the past 30 days, namely Hegic, CoTrader and Uniswap. The drop in token prices means a huge shift in the once-hot DeFi market trend.
Tom Albright, CEO of Bittrex Global, told FinanceMagnates, "July and August are very hot for the crypto market, especially DeFi. The DeFi boom has driven the appreciation of altcoins, especially ERC-20 tokens."
Of course, the reason for the decline in the price of DeFi coins may be a simple market adjustment. Because the gains in the DeFi space in the first few months have been impressive, but during this period, DeFi tokens have almost undoubtedly been overbought.
Deniz Omer, head of growth at Kyber Network, predicted last month that the astronomical profit of DeFi tokens at the time was “short-term” and that “there will be a callback at some point, especially when no more people enter.” It now appears, This adjustment may be happening.
In addition, the decline in the price of tokens is also related to the reduction in the rate of return generated by DeFi tokens for its holders. Waseem Mamlouk, financial consultant of Nimbus Platform, stated that the price of DeFi tokens “has returned to a more normal level because the income has also begun to be normal. Change."
Liquid mining is the main factor driving this wave of DeFi boom, but the blockchain and financial company SEBA stated in a report last month that “the trend of liquid mining in DeFi is unsustainable.” At present, this One area is reaching a tipping point, and the supply of liquid mining is exceeding demand.
The report states, “As long as buyers purchase new protocol tokens, liquidity miners can continue to switch between protocols. However, when buyers stop trading, this crazy behavior will also stop.”
Another factor contributing to the cooling of DeFi is the influx of scammers hoping to make quick money. Albright said, "It should also be pointed out that as DeFi has become particularly hot this summer, many bad actors have entered the market. This reveals that the worst players in the market are preying on the most vulnerable groups, and there are some outright Scam."
In addition to scams, some hackers also use the DeFi protocol for profit. DeFi lending platform Bzx lost $8.1 million in a hack in mid-September. This is the third hack this year due to incorrect codes in its smart contracts.
Even so, in the long run, DeFi will continue to develop steadily and slowly.
According to a previous report by "Betwee", Binance CEO Changpeng Zhao said in an interview that, just like the ICO in 2017, although there were many bubbles, there were still some successful projects. The same is true for DeFi. After the boom, some truly meaningful projects will develop for a long time.
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