How Did the Crypto Bull Run Impact Defi? What Does the Future Hold?
When Decentralized Finance (DeFi) gained merely a portion of its current market size last summer, many have believed that the segment is just a niche and that it will fade away. Not even a year later, the market’s valuation increased by at least six times.
Currently standing at $25 billion, DeFi proved itself to be more than just short-term hype. As a matter of fact, we gained insight into the long-term direction of the entire crypto market.
What kind of impact did the crypto bull trend have on DeFi, and what kind of growth can we expect in the future? Things have just started heating up. Will a market rally lead to further growth for decentralized finance?
Is DeFi the new ICO era?
While the cryptocurrency market was still small in 2017, blockchain projects triggered a bull run through the act of fundraising. Developers who had the ideas but not the capital were interested in crowdfunding as a means of creating blockchain platforms.
Powered by Initial Coin Offerings (ICO), the market quickly took a sharp turn, and investors began to build the entire blockchain ecosystem from the ground up. At the time, Ethereum served as an important hub for growing the ICO mania.
In 2020, a similar situation occurred. The emergence of decentralized financial products triggered yet another bull run. Decentralization became the number one goal of every developer, and soon we had the chance to see more and more such products. Popular ones include flash loans, decentralized exchanges, oracles, liquidity, yield farming, and so on.
The idea of turning all of the market’s services and products fully decentralized started in 2017. However, it took three entire years for developers to turn the idea into reality.
A new decentralized narrative will soon replace old projects
Which came first, the chicken or the egg? We are not yet entirely sure whether DeFi propelled crypto or if a new market rally pushed DeFi. In either case, it is apparent that both segments of the market have a synergic connection.
As Bitcoin grew and returned to its old price levels from the pre-corona crash era, DeFi began to entrench itself into the market. Soon, it arrived at the forefront of every crypto discussion and idea.
Many old projects were completely replaced by the new DeFi narrative. Moreso, the biggest decentralized exchange Uniswap, at one point, surpassed Coinbase Pro in daily trading volume.
The market saw not only that old projects might disappear into obscurity but that centralized exchanges are at risk as well.
The future of DeFi
Despite the doubt, DeFi persists with its parabolic rise. Although Bitcoin ranges and faces trouble keeping up the tempo, the decentralized finance market grows and even outpaces Bitcoin. With that information, what can we expect for the future to hold for DeFi?
At the current moment, user experience is the number one problem that prevents newcomers from joining the decentralized market segment.
DeFi only recently started its journey, and it will take time for it to reach the euphoric stage that ICOs once had. If this niche turns into the main narrative for crypto’s ongoing bull run, it is certain that decentralized finance will more than quadruple in size.
It is difficult to estimate how high DeFi could grow. But ask yourself this. When a new wave of investors arrives, and everyone starts using decentralized instead of centralized exchanges, how much volume will DeFi receive? One DEX already managed to temporarily outmatch a prominent exchange like Coinbase, who says that it cannot be done twice?
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