Opinion: Why Still Bullish on DeFi?

Compiled by: Luccy, BlockBeats Editor’s note: In this cycle, the most active areas of degen are airdrop mining and meme coins, corresponding to which DeFi tokens seem to be dying. But Pendle remains well insured against the staking narrative, up around 750% in the same period, and Uniswap’s fee switch could be the tipping point for other DeFi protocols to follow suit. DeFi researchers Ignas and Stacy discuss recent trends, arguing that there hasn’t been any game-changing altcoin season yet. But Ignas is still bullish on DeFi, and BlockBeasts compiled the original text as follows: OG tokens in the DeFi (decentralized finance) space appear to be dead. But the market is about to undergo a major shift, and a new wave of FOMO is about to hit DeFi. Here’s why DeFi is about to rise: DeFi tokens are far behind ETH. The DeFi Pulse Index (DPI) has declined relative to ETH for three consecutive years. And ETH itself has lagged behind BTC during this cycle. DPI includes tokens such as UNI, MKR, LDO, AAVE, SNX, PENDLE, etc.

1. Pendle’s unusual performance

The only exception is PENDLE, which rose approximately 750% during the same period.

2. Reasons for Pendle’s success

Pendle’s success is multifaceted. They successfully found a strong product market fit (PMF).

3. The dilemma of airdrop mining and meme coins

Airdrop mining and meme coins are the most active areas in this cycle.

Airdrop mining has reached a turning point: low-circulation project launches are sell-off airdrop events, and high FDV means more tokens will continue to be dumped onto the market. But no one wants to buy these tokens! And, for every successful meme coin, there are 99 that go to zero.

4. DeFi OG Tokens

DeFi OG tokens are the antithesis of airdrop mining and meme coins:

• A large number of DeFi OG tokens are already circulating in the market. Take the market cap/fully diluted valuation (MC/FDV) ratio as an example:

  • SNX - 1
  • MKR - 0.95
  • AAVE - 0.93
  • LDO - 0.89
  • UNI - 0.75

Some people have less selling pressure.

• In just 6 months, we have minted over 540,000 new tokens. Traders' attention and capital are spread thinly.

However, only a few DeFi OG tokens have solid businesses and revenue streams. If money starts flowing in, these tokens could benefit.

How Regulatory Clarity Fueled the Meme Coin Bull Run

Meme coins thrive in a financial nihilism and repressive regulatory environment. However, regulatory clarity is likely to create the biggest bull run, driven by:

1. Shift from narrative to product market fit (PMF)
2. Clear indicators of success
3. Easier access to funding
4. Booming mergers and acquisitions (M&A) Market

Reference Reading

Tweet from @FelixOHartmann, Managing Partner of Hartmann Capital:

If regulations are clear, the digital asset market could transform in a way that kicks off the biggest bull market to date. A few predictions stand out:

· The shift from narrative to product-market fit

Currently, many digital asset valuations appear to be free-floating numbers based purely on emotion and compensation. However, the tokens with the most substantial product-market fit and benefits may begin to dominate conversations and investment portfolios more frequently.

· The digital asset financing environment is more relaxed

With this rotation, there is quite a bit of duplicate cost and value being discarded. Therefore, stronger fundamentals will allow the protocol to raise funds more easily.

· Booming M&A Market

The maturation of individual crypto assets and the market as a whole may open the door for truly savvy traders and operators to build value and substance in ways we’ve never seen before in digital assets Comprehensively accelerate product development and innovation.

DeFi’s PMF and Funding

DeFi has the clearest product market fit (PMF) in crypto. In addition, established DeFi teams have large capital reserves, and they can continue to develop and build for many years without selling off their tokens.

The problem with DeFi tokens is their lack of practical use. However, this is starting to change: Uniswap’s fee switch could be a turning point for other DeFi protocols to follow suit, with UNI surging after the news. Furthermore, regulatory clarity may accelerate the trend toward gain-sharing.
Another problem is that DeFi 1.0 is too boring. But whenever prices go up, new things are always interesting. However, DeFi tokens have stood the test of time. They experienced the COVID-19 crash in 2020 and the centralized finance (CeFi) crash in 2022. As @sourcex44 said, “The only true audit is one that stands the test of time.”
I believe DeFi tokens are a good choice for inverse trading right now. There are currently very few people holding original DeFi tokens, which is like us accumulating ETH during a bear market only to see SOL rise. So if the trend changes, only a handful of OG tokens will be able to attract inflows.
Timing is critical. We are at a tipping point, tired of the new L2, celebrity coins, and waiting to see what the next step will be. Maybe the “next step” will be established DeFi tokens? I think they have a lot of potential to break out.
This post is a response to Stacy’s question about DeFi tokens. Most of these tokens are boring, but with a solid business, good financials, and with regulatory clarity and token utility increasing, DeFi has the potential to rise again.
Are DeFi Tokens Wrong? You can blame the decline in portfolio value on Mt. Gox, miner rewards, or any other black swan event. But they are just noise, and the real problem is more fundamental:
Every market represents some kind of value that is redistributed among its participants. At some point, different markets converge. The ETH and BTC spot ETFs are a prime example. New capital flows in, but doesn't go much further; capital gains from trading ETFs stay on traditional exchanges.
Meanwhile, existing crypto users benefit from new capital inflows into spot ETFs, with their gains typically reinvested, which logically should lead to altcoin season — but this time, things are different different.
Since March 2024, we have seen several major trends:
• A series of airdrops and points programs from top protocols
• Tier-2 protocols rushing to announce their token sales and TGE
• Memecoins becoming major meta One of the
• TON additions to the norm in its ecosystem
The few DeFi protocols showing good growth are clearly related to the trends listed above. Now, we have this setup:
• Bitcoin and Ethereum gains are only partially settled in cryptocurrencies.
• Given the yuan, these earnings are mostly reinvested in new tokens or memecoins, or used to farm points (locked into new protocols).
• Other DeFi protocols are not experiencing any price movement and holders are starting to lose hope.
• Few new protocols are trending upward following TGE, partly due to selling pressure from airdrop recipients and a lack of new funding.
• Alts keeps bleeding.
• The memecoin craze continues to attract more and more investors, once again fragmenting potential new funding for DeFi tokens.
• Bitcoin and Ethereum are least affected as spot ETF investors.
• TON has something up its sleeve with its standardized onboarding and mini-app. Its ecosystem is not yet part of broader DeFi.
At the same time, there is no next big dollar in DeFi. User experience improvements and efficiency fixes are important — but they don’t attract new users, similar to early days of DeFi, NFTs, or even GameFi.
• Airdrops are not new.
• Stablecoin yields are not new.
• GameFi is not new.
• FDV for most Web3 protocols is already pretty fair, but new dApps appear every day with more lucrative terms, which increases the supply of the protocol without stimulating new demand.
When the Ethereum spot ETF starts trading (probably early July), we will see some new money pouring into Ethereum, and crypto-native ETH holders may start reinvesting proceeds into DeFi - but the overall picture is not There will be a lot of changes. New money will enter trending metas (AI, RWA, DePIN, meme coins) and DeFi OG will struggle to at least compete with ETH.
It doesn’t matter. The new season has its own new heroes. What makes DeFi great again? Basically two things: a new (completely new) narrative and marketing.
DeFi has a total market cap of $90 billion, including LSTs like stETH ($3.2 billion) and DeFi stabilizers like DAI ($5 billion). By comparison, ETH has a market cap of $404 billion.
DeFi has many advantages compared to traditional finance, including more profitable passive income scenarios. But have you seen any well-known DeFi applications promoting their yield products to Web2 users?
When using DeFi becomes as easy as using a classic banking app, and DeFi starts to be promoted as the norm – we will finally see a new DeFi season. Alternatively, we need a new meta that will inject new capital into DeFi — similar to early GameFi, NFTs, or even DeFi itself.
This new yuan will get the most attention, and some of the capital will flow to broader DeFi. Similar to how Hamster Kombat or Notcoin mania fueled the broader TON ecosystem.But do we have something similar now? Recently, I had a chat with Ignas and we discussed current trends. Have we had any game-changing altcoin seasons before? No.
I know this post may be disappointing. Bullish content gets the most traction on CT because people want to believe money is going to be in their pockets, I know that feeling.
I have a lot of DeFi tokens bleeding out in my portfolio, but I want to be realistic. I doubt DeFi tokens will reach their ATH this year. If I'm wrong, I'll be happy.
Sorry for the clickbait behavior, I do believe that DeFi has the opportunity to usher in a big renaissance. The narrative in the crypto space changes quickly, and the rotation of capital will leave many people on the sidelines.
With meme coins currently in the spotlight, you might laugh at me for being optimistic about DeFi. However, the fundamentals are solid. What matters is that others begin to believe in its importance, and that belief may come back sooner than you think. As long as DeFi outperforms other tokens for a period of time, others will experience FOMO.

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