In this cycle, the most active areas of Degen are airdrop mining and meme coins, which correspond to the seemingly dead DeFi tokens. But under the staking narrative, Pendle is still in good shape, up about 750% in the same period, and Uniswap's fee switch may become a turning point for other DeFi protocols to follow suit.
The OG token in the DeFi (decentralized finance) space seems to be dead. But the market is about to undergo a major shift, and a new wave of FOMO is about to flow into DeFi.
DeFi tokens are lagging far behind ETH. The DeFi Pulse Index (DPI) has been declining relative to ETH for three consecutive years. And during this cycle, ETH itself has also lagged behind BTC. DPI includes tokens such as UNI, MKR, LDO, AAVE, SNX, PENDLE, etc.
The only exception is PENDLE, which is up about 750% in the same period.
Airdrop mining and meme coins are the most active areas of Degen in this cycle
Airdrop mining has reached a tipping point: low circulation project launches are sell-off airdrop events, and high FDV means more tokens will be constantly dumped on the market. But no one wants to buy these tokens! And for every successful meme coin, there are 99 that go to zero.
DeFi OG tokens are the antithesis of airdrop mining and meme coins:
First, a large number of DeFi OG tokens are already circulating in the market. Take the market capitalization/fully diluted valuation (MC/FDV) ratio as an example:
• SNX-1
• MSEK - 0.95
• AAVE - 0.93
• LDO - 0.89
• UNI - 0.75
This puts less pressure on holders to sell. The antithesis continues in token issuance: in just 6 months, over 540,000 new tokens have been minted. Traders’ attention and capital are spread thinly. Yet only a handful of DeFi OG tokens have solid businesses and revenue streams. If money starts flowing in.
Meme coins thrive in a climate of financial nihilism and repressive regulation. However, regulatory clarity could bring the biggest bull run, driven by:
• Moving from narrative to product-market fit (PMF)
• Clear indicators of success
• Easier access to funding
• A booming mergers and acquisitions (M&A) market
DeFi has the clearest product-market fit (PMF) in the crypto space: trading on decentralized exchanges (DEX), lending in lending markets, using DeFi stablecoins or LST as collateral, etc. In addition, established DeFi teams have a lot of capital reserves - they can continue to develop and build for many years without selling tokens.
The problem with DeFi tokens is that they lack real-world utility. However, this is starting to change: Uniswap’s fee switch could be a turning point for other DeFi protocols to follow suit, with UNI surging on the news. Additionally, regulatory clarity could accelerate the trend toward revenue sharing.
Another problem is that DeFi 1.0 is boring. But new things are always interesting as long as the price goes up. However, DeFi tokens have stood the test of time. They survived the COVID-19 crash in 2020 and the centralized finance (CeFi) crash in 2022. "The only true audit is the one that stands the test of time."
I believe DeFi tokens are good choices for the reverse trade right now. There are very few people holding the original DeFi tokens right now, it's like we accumulated ETH during the bear market and saw SOL rise. So if the trend changes, only a few OG tokens can attract capital inflows.
Timing is critical. We are at a turning point, tired of new L2, celebrity coins, and waiting to see what’s next. Maybe “next” will be the old DeFi tokens? I think they have great potential to explode.
When the Ethereum spot ETF starts trading (likely in early July), we will see some new money pouring into Ethereum, and crypto-native ETH holders may start reinvesting their earnings into DeFi, and I do believe DeFi has a chance to have a big resurgence. The narrative in the crypto space changes quickly, and the rotation of capital will leave many people on the sidelines.
Right now, meme coins are in the spotlight, and you might laugh at me for being optimistic about DeFi. However, the fundamentals are solid. What matters is that others start to believe in its importance, and that belief may return sooner than you think. As long as DeFi outperforms other tokens for a period of time, others will FOMO.
Later, I will bring you analysis of leading projects in other tracks. If you are interested, you can click to follow. I will also organize some cutting-edge consulting and project reviews from time to time. Welcome all like-minded people in the cryptocurrency circle to explore together.
