Early celebration often gives way to disappointment, especially when you are betting that any given crypto asset will overtake Bitcoin. That is exactly what happened with Yearn. A YFI flippening, turned into a floppening, showing us how bleak the future can be for DeFi.
You Got Our Warning!
We told you this was going to happen. We also admit our bias when doing so; Bitcoin is the greatest cryptocurrency in the market because its fundamentals are as solid as fundamentals can be.
Our minds are automatically skeptical of any early celebration in the space as well. That YFI flippening always looked like a hiccup, precisely because there are absolutely no solid fundamentals behind that project:
- YFI profitability depends on profits from fees on other DeFi projects
- DeFi in its present form does not create value
- All we see is a game of creating purposeless derivatives based on staking tokens
If you Went in Early, you Could Cash in
Nevertheless, it is also important to be fair. We clearly stated that some people would make money in DeFi. That is an undeniable fact.
No one can deny that despite that short-lived YFI flippening, the token is still worth more than $8,000 USD to enough market participants. If you bought it at a few hundred dollars, or even at a few thousand bucks, you are sitting on awesome returns.
What you do with them is entirely your call!
The Bleak Future of DeFi
In its present form, DeFi will not recover. We think that, as a concept, DeFi will only succeed if it empowers those who traditional finance left behind. Unbanked entrepreneurs who need non-collateralized micro loans of up to $1,000 USD to start a business, are the ones who need DeFi.
Here is why:
- There are about 2 billion unbanked people in the world, according to World Bank estimates
- Most of the unbanked live in developing nations
- These developing nations have incredible potential for economic growth
- The real problem is access to capital because banks require credit rating and collateral in most cases
As long as it centers around the relatively affluent few, who can stake tokens and have the technical know-how, the future of DeFi will continue to be bleak. Let us reiterate:
- People who participate in DeFi already have the kind of funds unbanked entrepreneurs seek
- Most are looking for profit on platforms that create money out of thin air – sounds familiar?
- These platforms only enable the transfer of existing value
Look at the Numbers!
This last point is important. From the numbers it seems that the YFI floppening is indicative of a wider trend. It seems like DeFi has reached peak value transfer and it is now declining.
Remember that we predicted that UNI prices would not recover? That is a clear indicator of how the lack of value behind these tokens is already spooking people.
The market understands that, which is why DeFi projects have lost ground across the board as Bitcoin gains ground.
Bitcoin is the Real DeFi
Going into Bitcoin from DeFi now makes sense. If you believe in decentralized finance, why not buy into the first asset that decentralized the monetary system?
Unlike all those DeFi protocols, Bitcoin has also proven that there is value generation behind its valuation.After all, for 12 years now, a litany of projects tried and failed to overtake Bitcoin.
The YFI flippening, much like the expected ETH and even the BCH flippenings, never held. Unless there is a project out there that will offer what Bitcoin cannot, floppenings are all we would bet on!