Multi-faceted analysis of the time and process of Defi bubble burst

DeFi has gone through a quarter from June to September this year, and the market has also experienced a crazy money-making effect. During this period, DeFi has a cooling trend, which is mainly manifested in the following aspects:

1. There are almost no innovative DeFi projects on Ethereum, and there is a general trend of convergence, that is, there are many similar projects.

2. The yields of the DeFi projects of Eos and TRON have gradually decreased, and the prices of mined coins have also been falling, causing some people to suffer losses.

3. Some DeFi projects have code problems that make fund security unsafe. Although most of them have been perfectly resolved, some accidents, such as the RAM hype of the "Coral Project" and the USDT locking of the "Rose Project", have caused psychological trauma to the participants, making them easily scared away.

4. Defi is shifting to other public chains. The technology is becoming more and more mature, and the technical barriers are further reduced. It is likely to become common in the future.

From this perspective, the last wave of DeFi hype can only turn to other non-mainstream public chains, such as "Ontology", "Bytom", "iost" and other projects. After this wave of hype is completed, if there are no other innovative DeFi projects to detonate the market, there will be insufficient stamina and unsustainable phenomenon, and then the bubble may collapse.

So this leads to the question in the title, how long will the DeFi bubble last? Here we compare the DeFi hype with the cryptocurrency hype and finally draw a conclusion.

The development of Defi itself

The development of Defi started on Ethereum in June. The current timeline of Defi development on Ethereum is that June is the outbreak period of liquidity mining, July enters the rapid development period, August enters the maturity period, and September enters the finishing work. It is not certain how long this finishing will last.

DeFi on the EOS chain started in July, entered the development stage in August, reached maturity at the end of August, and showed a trend of ending in mid-September, mainly manifested in the absence of new projects and a continuous decline in yields.

DeFi on Tron started in late July and early August, and entered its mature stage at the end of August. In early September, the shadow of a bubble had basically appeared, and now there is a trend of ending. The main manifestation is that the prices of mined tokens have basically plummeted, and there is no sustained money-making effect. In addition, the emergence of new exchange public chain DeFi mining has squeezed part of the space.

At present, the DeFi of exchanges has only appeared not long ago and has developed rapidly. This is the development stage and has not yet officially entered the mature stage.

In addition, DeFi of other public chains are now also beginning to appear. They are still in the development stage and have not yet matured. Of course, we still have some doubts about whether DeFi of other public chains can become mature and prosperous. The main reason is that the development of other public chains may not keep up. It is enough for a public chain to have one or two DeFi projects. If there are more, the participants may not have enough energy.

In this case, we simply superimpose these categories, similar to the superposition of waves in physics, and we choose to draw the period of development in a shape similar to a quadratic distribution:

What needs to be explained here is that the further we go, the more the money-making effect of DeFi will decrease. That is, the DeFi projects made by other public chains and exchange public chains will basically not be as popular as the DeFi projects like Ethereum before. Moreover, because the public chains in the future are more scattered, the development energy of the DeFi projects of each public chain may not be so sufficient.

In addition, the number of participants in these public chains is relatively small. Therefore, it is generally enough to have one or two DeFi projects with liquidity mining on a public chain. If there are more, it will be an imbalance between input and output, which is what the public chain project parties do not want to see. Therefore, the further back you go, the lower the heat will be, so the heat shown in the figure will also be lower and lower.

At the same time, the total heat will usher in a rapid increase in development every time a new mining public chain is released. If the heat dissipates, the decline in the total heat will decrease rapidly. The dotted line in the figure indicates the path that may be followed in a short period of time. With the naked eye, we can roughly estimate that the DeFi bubble may end around mid-to-late October.

The hype of the cryptocurrency circle

The cryptocurrency industry has been in chaos and speculation for more than a decade since its early days. The early speculation was less representative and may be biased if used as an analysis target, so we focus on analyzing the development from 2016 to the present.

We all know that there was a big bull market from the second half of 2016 to the whole year of 2017, but this bull market was also divided into several stages. The gap time between each stage is the time of callback. We all know that the stage in 2016 basically lasted for nearly half a year, and the first half of 2017 lasted for about 5 months, and the middle was about 3 months. Among them, the Bitcoin fork was one of the triggers. The second half of the year was divided by 94. From the end of the callback to the hot development, it basically lasted for 4 months. It was not until the beginning of the Lunar New Year in 2018 that the currency circle officially entered the callback, which was the moment when the bull turned to bear.

Then we can basically calculate that the duration of each stage in the bull market is at least 3 months and at most 6 months.

After the bull market ended, in the bear market, we saw the hype of Fcoin's liquidity mining, which caused a hype period of about 3 months, and IEO caused a hype period of about half a year, so this is also within the time range of 3-6 months we mentioned.

In other words, if we apply this DeFi bull market to this time, we can basically calculate that the hype period was from September to December this year.

Secondly, we need to consider the impact of other hot spots, such as this year's large-scale hot spots, the hype of ipfs and Polkadot. Basically, most people believe that the hype of ipfs will last for two to three months, and the hype of Polkadot may last for one or two months. Because this type of hype is relatively niche and cannot cause industry changes like defi, a duration of 1-3 months is more appropriate. In this way, the hype of defi may last until mid-October.

Taking all factors into consideration, we can estimate that the hype of DeFi may reach a stage in October , and then IPFS and Polkadot may dominate the market. Of course, all of this requires a premise, that is, there are no sudden factors in the market and no breakthrough innovation in the development of DeFi. In this way, DeFi may see a bubble clearing in a short period of time, but we need to note that good DeFi projects will continue to exist and become stronger, while some air projects or projects without innovation may be eliminated. This is not a bad thing for the entire industry, but a good thing.