While DeFi Buzz Continues To Dominate Conversation, Some Projects Are Beginning To Slow
Projects like Yearn Finance or SushiSwap have earned themselves key places in crypto history as DeFi has dominated conversation over recent months and emerged as the trending topic of the summer.
While the buzz has yet to die down, over the past 90 days DeFi has slowed as popular projects have hit roadblocks and investors have grown wary of the hype that eerily resembles the initial coin offering boom of 2017 which robbed investors of funds as dozens of tokens folded. Over the past month the space has seen a 40% pullback and today the median DeFi asset is currently down 3% over the past 90 days underperforming both Bitcoin and Ethereum with newly launched assets such as SWRV, CRV and SUSHI leading the decline, Messari research shows.
SushiSwap has made a name for itself as one of the early drama-generating DeFi projects. SushiSwap had a meteoric rise locking in $700 million worth of funds within three days of its announcement. However, trust in the Uniswap fork tanked after its creator Chef Nomi swapped his $10 million worth of SUSHI for ETH. While the project was picked up by FTX CEO Sam Bankman Fried and then soon switched over to a multisig, confidence in the project never fully recovered. After recording an all-time high price of $11.93 on September 1 the platform’s governance token, SUSHI, is now trading hands at $1.27. Value locked in has also dropped down to $433.9 million.
Swerve — a community run fork of stablecoin-focused decentralized liquidity pool Curve — had a similar narrative to SushiSwap. Swerve promises true decentralized governance, a common tactic among DeFi forks aiming to capture new liquidity providers. In the first two weeks following the launch of the protocol 9 million SWRV tokens were distributed and with the understanding that the supply would not increase again for the remainder of the year, a feature which supporters held up as an assurance that the token’s value would balloon while supply remained steady.
Four days after launching, Swerve amassed 40% of Curve’s total deposits, locking in $415 million. Three days before hitting $415 million TVL, SWRV’s price hit an all-time-high of $39.04. The protocol’s biggest supporters rallied around its true community governance compared to other projects where hefty pre-mines end up handing a dominant portion of control over to developers.
However the protocol’s decline has been as swift as it’s ascent with Swerve’s TVL plummeting to just over $43 million and its governance token’s price hitting an all-time low of $1.13 on September 23. Some attribute the lack of enthusiasm around Swerve to investor hesitation brought on following the SushiSwap disaster. Meanwhile, the original project Curve has a team of developers with funding that can be dedicated to innovation and is continuously working.
While fresh forks and first generation assets are leading the DeFi decline, projects like Yearn Finance, Aave and Synthetix are still performing well and even outperforming Bitcoin and Ethereum.
In addition to the high-performing DeFi projects, total value locked into the space has also remained high signalling that hope in this new trend has not been abandoned. Total value locked into DeFi currently stands at $9.5 billion, up 423% from 90 days ago. And the market capitalization of DeFi assets stands at $6 billion, nearly double what it was 90 days ago.
By Emily Mason