The Crisis and Opportunities of the DeFi Market: When Will the Wheel of Fortune Turn?

The brilliance of the DeFi summer of 2020 has become a thing of the past. At that time, new projects emerged like mushrooms after rain, and the liquidity mining craze brought annualized returns of three-digit or even four-digit percentages, attracting a large number of users and funds. However, with the arrival of the bear market, the DeFi industry suffered a severe blow. The total locked value ( TVL ) plummeted from its peak of $179.1 billion in November 2021 to the current $37 billion. Even the tokens of leading projects, like UNI, have fallen by 90% from their highs.

There are multiple reasons for the sharp decline in DeFi tokens. Firstly, a large number of projects were launched after 2020, and as tokens were unlocked, selling pressure significantly increased. Secondly, some projects that overly relied on Ponzi schemes were debunked, leading to a bubble burst. Additionally, the tightening of the regulatory environment, especially affecting the operations of projects in the United States, dealt a huge blow.

Nevertheless, industry insiders believe that not all DeFi projects have fallen into the "golden pit". Projects that can generate sustainable returns are more worthy of attention. Nowadays, the market is more inclined to evaluate projects using traditional financial metrics such as price-to-earnings ratio (P/E), which is seen as an advancement. There are not many projects that can clearly calculate P/E, mainly concentrated in the DeFi sector.

In the current market environment, some strategies for safely obtaining returns are favored. Maker's DAI deposit rate (DSR) offers a good opportunity, with an annualized return of about 5%. The strategy of combining ETH liquid staking with Maker DSR is also receiving significant attention. In addition, opportunities on some new public chains, such as Thala on Aptos, may also bring higher returns, but the risks correspondingly increase.

Looking ahead, industry experts are optimistic about several segments of Decentralized Finance.

1. Projects that can generate native yields have the potential to attract new users.

2. Decentralized stablecoins, especially projects that combine RWA( real-world asset) yields and LSD( liquid staking derivative) assets.

3. DeFi infrastructure, such as Web3 wallets, cross-chain solutions, and on-chain data analysis.

4. RWA integration, promoting the fusion of Decentralized Finance and the real economy, expanding application scenarios.

Although the DeFi industry is currently facing challenges, its value has begun to emerge. In this rapidly evolving field, projects that can continuously innovate and adapt may become the key forces leading the next bull market. For investors, in the current environment where risks and opportunities coexist, it is crucial to make prudent choices and continuously pay attention to market trends.