- A rally on the Bitcoin market has prompted traders to move their capital away from the booming decentralized financial sector.
- Almost all DeFi tokens on Wednesday plunged sharply over a 7-day period.
- Kelvin Koh, the co-founder and CIO of the Spartan Group, expects the downward correction of DeFi to continue.
A The rise of the Bitcoin market could cause problems for its financial sectorier decentralized neighbor, according to Kelvin Koh of the Spartan group.
The co-founder and CIO said on Tuesday that he expects DeFi tokens to experience sales in the coming sessions. It Messari shows that paraboliq altcoinsues including Aave (LEND), Compound (COMP), Syn thetix (SNC) and Kyber (KNC) have fallen from 13% to 25% of their market cap.
LEND fell almost 47% after hitting an all-time high of nearly $ 0.384. Source: TradingView.com
The plongeon appeared as Bitcoin has set a year-to-date high at $ 11,420. So it appears traders sold their DeFi tokens to secure their profits and shifted their gains to the Bitcoin marketplace. Ethereum, the second largest cryptocurrency by market cap, has also benefited from a similar trading strategy.
A zero-sum game
Mr. Koh, also a former partner of Goldman Sachs called the capital outflow a “wake-up call” for DeFi maximalists. However, he also noted that the recent correction would wipe out outdated projects while leaving behind only those with genuine and long-standing business models. term.
With “overhyped,” Mr. Kohreferred to the tokens that rose solely on the hype of “farm yield.” He notede that some projects offered higher returns to attract more liquidity and capital. Meanwhile, investors have also added leverage and risk to the system to get better profits.
Mr Koh said that overall it could become a zero sum game for everyone.
The DeFi market covers only 1.5% of the total cryptocurrency valuation. Source: Messari
Ryan Watkins, a researcher at Messari, also noted that DeFi will eventually fend for itself as investors begin to reallocate their worthless capital from store of value tokens and "Ethereum killers". (In the top 30).
Bitcoin was trading at $ 11,039 at the time of writing.