Has the DeFi Bubble Popped?
For those of us in the crypto community that have been around since before 2017, the recent bull runs in tokens named after vegetables seems all too familiar. For whatever reason, many of the DeFi products that have grown in popularity in the last two months are named after a variety of foods. Yams, Sushi, porkchop, and even hotdog tokens just to name a few. During the 2017 bubble, it seemed like everyone and their dog had a token named after them. The lack of actual value in these ICO projects put a very sour taste in the mouths of those who are promoting the legitimate usage of cryptocurrency.
These rotten projects typically copy the code from other established protocols, and rename it to a memeable noun. While there are legitimate uses for DeFi, the application of the time old pump and dump scheme is obscuring the use case of DeFi. Furthermore, the introduction of bad projects into the space ultimately causes bubble-like behaviour within the crypto markets. Although a lot of money is to be made in bubbles, and from pump-and-dumps, it brings an overall bad taste to cryptocurrency. This latest market crash could be the pin that pricked the DeFi bubble, leaving only the legitimate DeFi projects standing afterwards. Shout out to COMP, MKR/DAI, and AAVE.
The Market Bounce Back
Back in the March 2020 crash, nearly every cryptocurrency saw about at least a 30% reduction in value overnight. However, crypto markets bounced back faster than any other world stock market. In fact, bitcoin even outpaced gold, clinging to its status as a safe haven asset. Even though that status was essentially debunked during the March 2020 crash, there is some truth to the notion. Because bitcoin was able to bounce back, and even rise to heights not seen since 2017, there is some amount of truth to bitcoin as digital gold.
This is the essence of HODL (hold on for dear life). Long time cryptocurrency traders and enthusiasts know that bitcoin goes through dramatic cycles of volatility. If you want to get the upward volatility, then you need to be able to stomach the downward volatility as well. For many, this is too much to handle, prompting them to panic-sell low, and FOMO-buy high. If you’re new to the world of cryptocurrency, then you’re going to want to talk to someone who has HODLed through 2017. They may be able to coach you through the periods of volatility where you feel you need to adjust your trading strategy. Hopefully they’ll be able to talk some sense into you and convince you that these market swings are just business as usual.