The latest data from Santiment shows that the collective market capitalization of all defi-related assets dropped by 25.1% on October 7, while daily trading volumes went down 30.2%. The data also shows popular defi tokens like Sushi took heavy knocks after dropping by 50.9% during the week. Also making the list of heavy droppers is Uniswap’s new token (UNI) which lost 38.2% and the YFI which dropped by 31.3%.
According to Santiment’s Defi watchlist, many of these decentralized finance (defi) tokens have already erased the bulk of their summer gains. Meanwhile, as expected, news of this significant drop in market capitalization has added impetus to the ongoing debate about the so-called Defi bubble. defi critics insist the popularity of this space, which has plagued by scams and faulty contracts, is just hype engineered to enrich token creators and founders. When the hype dissipates tokens will drop in value leaving investors worse off. For example, prior to Santiment’s data release, Twitter users like Alan Silbert had been circulating data which supports this contention.
Yet despite these strong assertions by critics, proponents of defi insist that the latest drop in value only points to a market correction and that defi still has a future. In his comments on the recent slump of defi market cap, Daniel Dabek, Founder of Xcalibra Exchange thinks this could be due to the mismatch between the volume of coins and the demand.
“When prices rocket up, it is because of the low volume of coins (that) are entering exchanges,” said the Founder of Xcalibra Exchange. He adds that it takes time “for people to deposit them and be in a position to bring liquidity.”
Nevertheless, Dabek remains optimistic about what the future holds for defi. He says:
“However, you see more established coins like MKR AAVE ENJ AMPL are still holding up well, and even some green with TRADE introducing limit orders recently; and fervent demand for UNI as it approaches its introductory price of around $3.00 after a high of $9.00. This space is evolving quickly.”
Concurring with Dabek is Long Vuong, the Founder of Tomochain who notes that “this is probably the first significant correction of defi.”
However, Voung is quick to add that “as crypto communities expand, defi will become more used, more resilient as it fulfills the essential needs of exchanging cryptos, borrowing with crypto collaterals, and building more new crypto projects.”
Meanwhile, following the latest market cap drop, it remains unclear if this correction phase had ended. However, it is worth noting that some of the tokens appear to have made some recovery on October 9, 2020, and at the time of writing.
What do you think of this latest defi market cap drop? You can share your thoughts in the comments section below.
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