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Where Does it Take Top DeFi MC for the Next Bull Run?

Time moves so fast in Crypto that it seems DeFi has been here for a long time, but in reality the entire DeFi space was born in the last bear market.

While BTC or even ETH had more than one bull runs, DeFi had its first during 2021.

Let’s remember how it was 🧵.

Let’s start with BTC.

After 3 bull runs, BTC still had steam to go from 67B from 2019 lows to 1.2T Market Cap (almost x18).

Now it has fallen ~75% to 314B.

What about ETH?

ETH had an amazing run from 10B from the 2020 lows to 545B (a x54 increase!!).

It has since dropped 73% to 150B. Still a x15 increase from the previous bear market lows.

In terms of dominance, this chart shows that ETH has regained the dominance obtained in 2018. It seems it will not lose it this time.

That’s bullish for DeFi, which is the major drive for ETH utility (it was the lack of it that caused ETH dominance to drop in 2019/2020).

Depending on where you look, current DeFi MC can be between 35B and 43B.

TVL of DeFi dropped from a peak of 177B to 35B. That’s an 80% drop.

It was a mix of protocols falling +90%, a few less than 75%, and others being born during this period…

…and we all know, some of them crashing to 0.

Did you notice that current DeFi MC is more than half BTC MC in the last bear market? And 4 times more than ETH MC?

It makes me wonder how low we can go still…

The same way that BTC had many opportunities to grow and become dominant, the OG DeFi protocols will benefit from Lindy effect to create roots.

However, DeFi is a fragmented space. That means that, unlike BTC that collected all the retail investment in the previous bull runs…

… now the investment is scattered around thousands of tokens…and the number tends to increase.

What are the implications of that?

1) Numbers not always go up

When all retail invested in BTC, price went up. Easy…

Now, retail chooses among a myriad of tokens, so some may go up while others may go down. Value is also transferred from one token to another.

Selection becomes trickier.

2) OG DeFi protocols may be dethroned

We are getting a glimpse of that between ETH and BTC.

Who’s to say that Curve or Uniswap won’t be replaced by a more efficient and/or elegant solution?

The Lindy effect counters it, but who knows?

3) Harder to DYOR

Before: Understand Bitcoin → 🤯 → Invest in BTC.

Now: In the pursuit of innovation, protocols are getting increasingly complex. Apart from being more of them, they are also harder to analyze and make an investment judgment.

4) More possibilities for x100

Before DeFi, a new project was basically a new blockchain, with an associated network that took time to build.

With the easiness of creating a new token, a protocol appealing enough can produce a x100 gain more easily for early investors.

Although recent, DeFi already had several evolutions: 1️⃣ Lending markets, Exchanges 2️⃣ 0 → 1 innovation: Constant-product AMM 3️⃣ Stableswap and the rise of stablecoins 4️⃣ Liquidity mining 5️⃣ Protocol owned liquidity (OlympusDAO) 6️⃣ Real Yield 7️⃣ Derivative markets

So, predictions for top DeFi MC for the next bull run? 500B? 1T?

MC of largest protocol, aside stablecoins? And TVL? Will it be an OG or a rising star?

What major innovations will be unlocked?

This post is based on this twitter thread.

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