What has reached its climax
Ethereum DeFi has now peaked for the time being
Despite the weakness in the old markets, Ethereum has performed well in the 36 hours since Uniswap's UNI token was introduced. Since the time of the announcement, the coin has gained more than five percent, outperforming the majority of other cryptocurrencies.
However, other DeFi coins didn't do as well.
According to data, many top DeFi coins, including Yearn.finance, Aave, UMA, and Synthetix Network Token, have lost over five percent in value in the past 24 hours, with ETH lagging 10 percent and BTC six percent.
Analysts believe that this trend of DeFi coins underperforming - something that has not been seen in months - could, in the short term, mark the beginning of the end of the decentralized finance growth phase.
A prominent market commentator posted a Twitter thread on the topic, writing why DeFi may now have peaked.
This is why this analyst sees DeFi at its peak
Prominent crypto derivatives trader “Theta Seek” believes the DeFi market has peaked after that space has grown exponentially since Compound's COMP token launched in June.
His main arguing point with DeFi is that it's “too difficult to use” right now for the average user - especially those who have just gotten into the crypto space:
"While the traction for DeFi (AMM + deposits / income) has increased tremendously in the past few months, DeFi is difficult to use, the ability to lose funds is a deterrent for most new users."
In particular, he cites the story of a user who spent $ 1 million worth of Tether's USDT on a contract that failed to get his funds back.
Theta also noted that the value of capital entering DeFi space is likely to slow down:
“A more visible metric is the rate at which stablecoins' market capitalization is growing. USDC is one of the most widely used stablecoins in the room. USDC's market cap increased by 800 million ("New Money") last month, while DeFi market cap increased by more than 3 billion over the same period. "
This could be the case as many DeFi coins have been printing technical caps in the past few weeks that have fallen dramatically from highs in late August or early September.
Theta also comments that DeFi has reached a point where regulators could start targeting companies and innovators in the room - especially if there are bugs, hacks, or other questionable trends in the room.
Not the only one who fears a loss of momentum
But not only Theta Seek fears that after a breathtaking rally in the past three months, it may be time for DeFi to cool off.
Cryptoanalyst Ryan Watkins also comments on the ongoing congestion on the network:
“Ethereum is damn useless right now. I can only imagine what retail investors will think when they finally get into this market and face gas fees in excess of $ 50 and transaction confirmations in excess of 10 minutes ... That was my biggest concern about this bull run. The protocols are ready, the infrastructure is not. "
Watkins isn't the only one who shares this view. Many others in the room have noted that a number of factors - most notably deficits in user experience - could put pressure on DeFi by the time technologies like ETH2 and EIP-1559 are implemented.
Proof of text: Cryptoslate
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