DeFi’s Astronomical Rise as the New “Poster Child” of the Crypto Market
Posted On September 26, 2020
We are at the start of some big changes in the financial world. Escalating debt and inflation could result in years of stormy weather for global economies. Renowned entrepreneur and author Jeff Booth endorse Bitcoin as a “must-have” investment in times when central banks are exacerbating the escalating debt problem. Author of The Price of Tomorrow, a book about stark warning deflation, Jeff Booth points out the only two choices left are grim, with the first being governmental default on global debt through a deflationary depression, which would include a banking system collapse, or default through hyperinflation, which appears to be starting already with mass money printing. In his opinion, the two dangerous economic trends are largely being ignored. It asserts that technology and price deflation will cause lasting widespread unemployment while the global economy is underpinned by an unstable mountain of debt. Booth further adds: “In my humble opinion — Bitcoin is a must. Not just for your wealth but as a lifeboat.”
Meanwhile, alternatives to traditional banks are now gaining popularity. As in most technical domains, evolution in the crypto industry moves in waves. The first wave was the building of layer-one blockchain solutions and infrastructures like Bitcoin (BTC) and Ether (ETH). The second wave was the ICO (Initial Coin Offering) boom. As this draws to an end, then we have DeFi (Decentralized Finance) which emerged at just the right time. As a result of DeFi’s landscape evolution and changes, there’s no one way to quantify the rate at which the technology is altering conventional financial services.
It is no longer news that decentralized finance provides crypto holders with a myriad of opportunities to earn passive income. The most lucrative DeFi-optimized sectors at the moment are decentralized exchanges, lending and borrowing, derivatives, and assets. The core principle of these platforms is to allow borrowers to collateralize digital assets and take out loans in other cryptocurrencies at better rates when compared with the yields from traditional lending services and banks. Decentralized derivatives systems create virtual assets that can represent the value of real-world financial assets. The goal here is to expose crypto holders to a wide range of markets.
Former Messari Head of Product and well-known crypto trader Qiao Wang believes the nascent DeFi sector has enormous growth potential. DeFi has been on a tear since the beginning of 2020, and TVL across all DeFi platforms in dollar terms has increased over 1000% and it does not look like slowing down anytime soon. Wang compared this year’s DeFi boom to pre-2013 Bitcoin and pre-2015 Ethereum, which he stated were “once-in-a-lifetime asymmetric bets.” Comparing DeFi to the multi-trillion-dollar world of banking and traditional finance shows that it has a lot of room for growth. And even compared to the crypto market as a whole, DeFi is still just a blip with a market cap for the leading 37 DeFi tokens representing just $6.7 billion, or 2% of the total market capitalization of all cryptocurrencies, according to Messari.
With DeFi’s astronomical rise as the new “poster child” of the crypto market, the past two years have seen digital asset markets grow by leaps and bounds, largely due to the rapid maturation of projects and the people behind them. The times are ever-changing, and DeFi could potentially lead the way.