The Decentralized Finance niche continues taking the crypto world by storm as discussions of a bubble started. What is the future of this niche?
To learn more about the talks about a DeFi bubble, as well as two projects you won’t want to miss out, make sure to watch Bitboy’s latest video.
Instability in the Crypto Market
As the crypto space instability continues for some top projects, it is easy to forget the investment opportunities the current situation represents as investors focus on their personal feelings about the crypto ecosystem.
In the weeks before these discussions, most crypto investors lived in a harmonious bubble where everyone was making money as projects kept growing, but now members of the community are turning on each other.
Last week has seen a rise in discussions on Twitter between big-named personalities in the space regarding the future of the explosive DeFi niche, as most of those involved focus on the positives of their niches.
Flashbacks to 2018
The situations es reminiscent of early 2018 when Bitcoin plunged, taking several project’s values with it, but differs in key aspects.
While Bitcoin rules the market and its cycles are the guides that lead altcoins to their destinations. For a moment earlier this year, Decentralized finance began to decouple from Bitcoin, as investors began to flock to the DeFi space they found projects that were new and innovative.
For many investors, DeFi brought life and energy back to crypto after the long bear winter. But what DeFi decoupling from bitcoin did, was allowing it to decouple on the topside also. This results in days when Bitcoin is looking ready to break out but the same behavior is not seen for DeFi projects, but often losing value even when BTC is green.
This has led many people to speculate that DeFi has created its own bubble as it faces oversaturation of projects. The situation was similar to that of the crypto sphere back in 2017 when the ICO craze hit, creating an unsustainable level of oversaturation that eventually brought ICO returns down along with the whole market with it.
As people were able to launch these initial coin offerings with just a website, this opened up investors for exit scams & big losses. Rug pull scams and whales manipulating prices by taking advantage of collateralized loans are seen again as the situation of DeFi as a whole evolves.
DeFi Took Over Ethereum
So the question is, is that over? Will people still be able to make huge returns on DeFi. The future is uncertain, as Ethereumhas almost been tapped out as a network due to high gas prices that forced other projects to move to different blockchains.
At some points in recent months, the Ethereum network has been basically unusable, something unseen since crypto kitties back in 2018, with the added difference being that now, there are way more users counting on these transactions to go through.
Each day, the number of DeFi projects dependent upon this network increases, which sustains its saturation and causes losses to investors waiting for the verification of their transactions, preventing them to get in or out on time
The question is, what will the result of this situation be? DeFi can rise on a wider scale as projects like TRON, Cosmos, & Polkadot come into the fray? It seems likely, as these networks have expanded their offers to attract DeFi projects, as well as dabbled in DeFi directly.
We also saw Changpeng Zhao announce publicly that Binance would be lowering their standards for the types of coins they list. If Binance and other centralized exchanges don’t start doing something soon, they might seem themselves greatly affected by the huge offer they are missing out.
What is Next for DeFi?
While the situation seems similar to that of ICO’s, the truth is that the blockchain ecosystem is more mature and offers more alternatives than ever to the most popular blockchain networks. This opens the door for existing and new projects to adapt and find workarounds for the saturation experienced by Ethereum.
With the release of Ethereum 2.0 being around the corner and discussions on a change in the fees system, it is also likely that the congestion of the network might be addressed soon by its developers.
If other networks and Ethereum can raise to the situation, it is highly likely that the DeFi niche will get out of this hassle stronger than ever. Many experts agree than this could represent the start of a bull run for DeFi as a whole and that talks of a “bubble” are premature. Time will tell.
To learn about the ongoing giveaway as well as OFIN and XFinance, two DeFi projects that are gaining popularity, make sure to watch Bitboy’s latest video.
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