In the post-farming era, where does DeFi go?

Produced | Odaily (ID: o-daily)

Produced | Odaily (ID: o-daily)

In the past half month, the DeFi market has experienced ups and downs like a roller coaster. After reaching staggering highs, most DeFi tokens fell in an avalanche, and their prices halved several times.

Odaily statistics found that most DeFi tokens experienced a cumulative decline of around 50% in September. Even the old batch of DeFi tokens such as LINK and MKR were affected by the overall decline of the sector, and the decline was basically around 30%. The new generation of DeFi tokens that focus on the liquidity mining model is even worse: SAL (salmon), KIMCHI (kimchi), and SUSHI (sushi) generally fell by more than 70%.

Liquidity mining, which was once in full swing, was like a shot in the arm, which helped DeFi achieve unexpected success. However, the overdose of the shot in the heart caused "heart failure" after the seedlings grew.

secondary title

Market review: the last highlight of DeFi

September is the last bright moment of DeFi tokens, and many projects are accelerating to the top.

Fueling this shock is the DeFi protocol SushiSwap.

On the basis of the decentralized trading protocol Uniswap, SushiSwap added the design of liquidity mining and launched the governance token SUSHI; the annualized mining income was once as high as 9500%, which made the market crazy. In just three days after going online, the total value of locked assets (TVL) exceeded $700 million.

Centralized exchanges naturally cannot ignore SushiSwap's powerful "gold-absorbing + eye-catching" ability.

On September 1, dozens of exchanges, including the three major exchanges, successively announced the listing of SUSHI; the price of SUSHI also rose from $6 to $16, a record high, with a maximum increase of more than 150%.

According to data from DeFiMakerketCap, the total market value of DeFi reached a peak of US$17 billion on September 1, and most DeFi tokens, including SUSHI, DF (dForce’s token), KIMCHI, etc., also hit new highs on that day or within a few days after that.

However, as the founder of SUSHI was cashed out, problems such as multiple projects running away and thunderstorms emerged one after another, and DeFi tokens began to fall in an avalanche.

image description

(Sushi, SAL, KIMCHI price daily chart)

Taking SAL (salmon) as an example, the price once soared to 1,200 USDT after its launch on September 2, and then began to plummet. The current price remains around 8 USDT, with a maximum drop of 98%.

According to statistics from Odaily, from the beginning of September to the present, the new generation of DeFi tokens that focus on the liquidity mining model generally fell by more than 70%; even the old batch of DeFi tokens such as LINK and MKR were also affected by the overall decline of the sector. The decline is basically around 30%. As follows:

The entire DeFi sector, except YFI, YFII and individual projects, has maintained an average decline of more than 30%.

Different from the sluggish performance of DeFi tokens, mainstream currencies such as Bitcoin performed relatively smoothly in September, and the cumulative returns were: BTC (-7%), ETH (-16%), and XRP (-13%).

secondary title

Reason Analysis: The Farm Mode has come to an end

Why is the DeFi project that once attracted many investors flocking to it now sluggish and "falling endlessly"?

William, the chief researcher of OKEx Research, believes that there are two main reasons: one is the collapse of the liquidity mining model, and the willingness to buy DeFi projects has declined; the other is that inferior projects suck blood, forming a "lemon market".

"Although the market is currently touting the advantages of DeFi, many people have not yet realized that the popularity of DeFi throughout the summer is not at all due to the advantages of DeFi itself, but because of "liquidity mining". People are not pursuing the value of DeFi itself, but the high returns of DeFi currencies. ’ explained William.

The key to "liquidity mining" is that the tokens mined in the primary market can be sold and realized in the secondary market. If the price of tokens in the secondary market collapses, the “digging-withdrawing-selling” system of yield farmers will collapse, followed by a large number of “farmers” leaving the market, and the liquidity of DeFi projects will dry up.

Therefore, the key to maintaining the prosperity of the DeFi industry is that its secondary market prices can be supported or even rise, and the danger is that the secondary market has now become a silly game of "drumming and passing flowers". The reason why everyone doesn't care about DeFi coins They are willing to pay a premium for the real value of the species because they expect a greater fool to buy it from them at a higher price.

With the gradual solidification of different player "classes", small and medium investors in the secondary market cannot obtain enough funds from the primary market to replenish their blood, which makes this "Bo stupid game" in the secondary market collapse.

lemon"lemon"In American slang for "shoddy" or "something that doesn't work").

In the field of DeFi, due to the open source code of many projects, the cost of plagiarism is very low. Driven by the sudden wealth effect, more and more "lemon" projects have appeared. Since August, news of DeFi "earth dog" projects being thundered or running away has been common, and many "blood-sucking projects" have even appeared, plundering the liquidity of high-quality projects, leading to adverse selection in the market, high-quality projects being gradually eliminated, and low-quality projects gradually Occupying the market, investors also began to "vote with their feet" to leave the market, which was reflected in the currency price in the secondary market.

Mo Ke, the co-founder of BlockArk, also expressed the same opinion: "It has been almost two months since the DeFi speculation wave started at the end of June. .Recently, a lot of coins have been profitable and can’t rise. The core reason is that there is no buying order. How can it rise without buying orders? It can only be infinitely negative and infinitely cut. There are a lot of big money earning hundreds of millions around me. Most of them It's all handed over."

Of course, the decline of DeFi liquidity mining does not mean the end of DeFi development.

From the data point of view, before liquidity mining became popular in June, the value of locked positions on the chain had already reached 1 billion US dollars, which shows that DeFi still has application value, and now it has surged to 9 billion US dollars in just three months. Just blowing up the bubble.

The bursting of the bubble is actually a healthy cleansing for the entire DeFi industry.

secondary title

Market outlook: Bitcoin remains strong

For investors, nothing is more concerned about market outlook and coping strategies.

At present, the liquidity mining projects are basically declared to be dead, and there are very few projects that can really survive. Therefore, Odaily recommends that you carefully go to the secondary market to buy (accept) related projects.

"Next, the market has entered a difficult game period. It is no longer the stage of picking up money in July and August. We should switch from making money to a strategy of not losing money." Mo Ke gave the above suggestions.

In addition, Bitcoin is still a good investment target. With the bankruptcy of liquidity mining projects, there is a high probability that funds will flow back to mainstream currencies such as Bitcoin. Since September 4th, Bitcoin has started to rebound steadily, with an increase of 8%.

Another driving force supporting the rise of Bitcoin is the release of water from central banks around the world. At present, the Federal Reserve may continue to implement loose monetary policy to promote economic recovery.

This point can also be confirmed from the US stock market in recent days. After experiencing a short-term correction, the three major U.S. stock indexes began to stabilize and rebound in the past week.

Bitcoin, which is highly correlated with US stocks, has also maintained a strong upward trend. Especially in recent days, there has been blood-sucking phenomenon, DeFi tokens have plummeted, mainstream currencies have fallen slightly, and BTC is thriving. But at the same time, the trading volume of Bitcoin has not risen sharply, and it remains to be seen whether the funds in the market outlook will return to the pie.