Even though the Covid-19 pandemic disrupted almost every other industry, Decentralized Finance [DeFi] witnessed exponential growth over the last few months. As the fervor around DeFi grew stronger with time, several platforms were seen venturing into the space. While DeFi went about locking great value, prominent crypto influencers suggested that DeFi was a bubble in formation. However, Messari Crypto’s Founder, hinted that the bubble would pop sooner than expected.
DeFi Following ICO’s Footsteps?
Right after DeFi fell under the crypto spotlight, several scammy projects claiming to have high yields infiltrated the space. Elaborating on the same Ryan Selkis, the founder of the prominent crypto platform, Messari Crypto tweeted,
“We’re nearing the apex of ponzi economics, rug pulls, and “yield” hopping, and ETH fees are going to eat too heavily into non-whale profits.”
Back in 2017, ICOs took the crypto-verse by storm, and in the present-day DeFi seems to be following a similar trail. Selkis pointed out how people assumed that there would be “coordinating utility token for every industry” which led to the boom of ICO. However, he believes that DeFi is just a “big pool of capital” that has been sloshing about a group of people, mostly insiders as well as mercenaries. He added that these individuals would soon run out of people to “fleece”.
Over the last few months, the DeFi space had been consistently hitting new all-time highs in terms of the value locked. DeFi even went on to lock a high of $9.605 billion. However, soon after this, the value of the industry came crashing down to $6.116 billion. During the time of writing, the total value locked in DeFi was at $7.65 billion.
Selkis further highlighted that he stood by the “if it looks too good to be true, it is” rule and suggested,
“That’s 50% APY yields and greater fool investing in a nutshell. A better way to play DeFi may be to own a couple of blue chips, and forget about them for 3-5 years.”
Additionally, he asserted that even though he loves the “experimentation” he wouldn’t endorse DeFi to a lot of people as he doesn’t recommend “high-stakes vegas poker to fish.”
Blockstream’s Adam Back shared similar thoughts as he had previously suggested that DeFi was a bubble in the making.