The DeFi bubble has burst, but data indicators show that DeFi itself has become stronger

Source: Unsplash

DeFi token prices aren’t everything

The DeFi bubble may have burst, but DeFi itself has emerged stronger.

After the absolute DeFi explosion this (northern hemisphere) summer, with food-themed yield farming popping up everywhere, billions of digital assets flowing into untested and unaudited protocols, anonymous founders based on cartoon characters being hailed as heroes, and “million-percent yields” flashed across colorful user interfaces, the bubble inevitably began to deflate.

The hottest DeFi tokens begin to crash

To be sure, the DeFi craze was followed by coding errors, hacks, scams, and fraud. Outside of the cryptocurrency market, U.S. President Donald Trump fell ill with the coronavirus and questioned the approval of a new stimulus package from Congress. Soon, those incredibly high returns became hard to reverse, and tokens that had previously seemed to only go up began to collapse.

The DeFi hype is fading. In the past week alone, the hottest tokens of the past summer, SUSHI, SWRV, CRV, YFI, and UNI, have fallen by more than 20%. According to Santiment data, the total market value of the DeFi market has fallen by 15% in the past month.

Bullish indicators

Even though the DeFi hype is shrinking, DeFi is stronger than ever. Through these boom and bust cycles, protocols can learn to build better, more secure products. As token prices plummet, DeFi continues to rise in other metrics:

According to DeFi Pulse, the total value locked in DeFi has risen 15% over the past 30 days to $10.5 billion.

Data provided by Richard Chen of 1confirmation and Mika Honkasalo of The Block show that the number of new daily DeFi addresses has exceeded 6,000 for the first time ever.

According to DeFi Pulse, outstanding loans issued by DeFi protocols surged more than 40% to $2.3 billion over the past 30 days.

While many people have only heard of DeFi during the liquidity mining craze, crypto-punk financial systems like MakerDAO have been around since at least 2017. The ecosystem we see today was built during a bear market. The recent downturn is not a sign that DeFi is or will be dead. If anything, it will prompt developers and teams to refocus their efforts on building a more open, accessible, transparent, and fun financial system.