It’s been a bloodbath in the DeFi market over recent days. The best case in point of this trend is Yearn.finance (YFI) — largely regarded as the “index” for Ethereum’s decentralized finance space.
The coin is down 35 percent in the past week alone and nearly 50 percent from the highs established just weeks ago.
Chart of YFI’s price action over the past week. YFIUSD Chart from TradingView.com
Other top coins in the DeFi space have also seen strong corrections, with some dropping even further than YFI from their recent highs. Ryan Selkis of Messari summed it up well just recently when the shared the tweet below, highlighting the level of carnage seen in the DeFi space:
More like UNEASYs.
Performance vs cycle high:
UNI – down 45%
Nexus – down 47%
ETH – down 30%
Aave – down 48%
SNX – down 53%
YFI – down 46%
These are the DeFi “blue chips” for anyone who wants to BTFD / catch the falling knife.
— Ryan Selkis (@twobitidiot) September 21, 2020
This strong correction has left many fearful as to what comes next for this hot segment of the cryptocurrency market.
Most remain optimistic about DeFi’s long-term prospects. But it’s worth noting that those that say this have asserted that they do not know where exactly the ongoing bear trend will put in a bottom, then reverse higher.
Ethereum DeFi’s fundamentals are stronger than ever
DTC Capital founder Spencer Noon thinks that while the crypto market is blood-red today, he believes that the fundamentals of the decentralized finance space remain better than ever:
“Crypto markets are red today. But consensus among most instl investors is that this is macro driven; not crypto driven. The fundamentals for $BTC $ETH and $DEFI have actually never looked better.
Some will BTFD. Others will scale in. I expect both will be rewarded handsomely.”
Some will BTFD. Others will scale in. I expect both will be rewarded handsomely.
— Spencer Noon (@spencernoon) September 21, 2020
Noon added that this logic applies to Bitcoin and Ethereum, both of which have been some of the best-performing macro assets of the COVID-19 pandemic.
One reason why Noon thinks that DeFi is in such a good place on a macro time frame is the relatively high-interest rates offered in this ecosystem compared to traditional finance — now dubbed TradFi on Twitter.
The cryptocurrency investor and commentator made this view known on Sep. 21 when he shared an advertisement from a fintech company announcing a “groundbreaking” savings product that nets users three percent per annum compared to most national banks that offer 0.01 percent to 0.9 percent per annum on cash deposits.
DeFi, on the other hand, has products widely deemed “safe” by security auditors that can yield in excess of 20 percent per annum. And more risky products, often related to food coins, can yield returns in the hundreds of percent per annum.