DeFi projects have dominated stocks in recent times, and the unexpected departure of a high profile founder has had ripple effects across all cryptocurrency markets. Here’s the main news from last week:
SUSHI’s upward surge came to an abrupt halt as the head of the project cashed in all of his chips earlier this week, and the resulting selloff knocked out the rest of DeFi, ETH, and Bitcoin (BTC). from their perches, some of which were high for the year.
There is, however, a silver lining to this cloud.
Weekly snapshot of the performance of the cryptocurrency market. Source: Coin360
SUSHI’s chef “leaves the kitchen” but can the rest of the cryptocurrencies handle the heat?
SushiSwap, a fork of Uniswap, has successfully migrated Uniswap liquidity into its protocol. There was about $ 810 million worth of tokens in SushiSwap, or 55% of Uniswap’s liquidity. By the end of the trial, SushiSwap’s value had reached an all-time high of around $ 860 million, according to DeBank.
Shortly after SUSHI reached that high level, the anonymous founder “Chef Nomi” withdrew all funds from the company’s coffers (worth approximately $ 27 million) shortly after insisting that the money was intended for development and would not be taken by the company, and then insisted to Cointelegraph that he didn’t come up with a scam. This move has led many crypto comedians on Twitter to claim that Nomi “left the kitchen”.
Predictably, the SUSHI token was sold almost immediately as people lost faith in the viability of the project. The selloff was so quick that it torpedoed the entire cryptocurrency industry, bringing down the rest of DeFi and even ETH and Bitcoin. At one point, DeFi as a whole fell about 50 percent from previous highs.
A number of experts have been quite outspoken about the DeFi bubble bursting and even compared it to the ICO bubble, saying that people haven’t learned anything since.
While the “bubble”, as it stands, may eventually burst, it would be premature to call it the end of the DeFi era. After all, the likes of Cardano (ADA) and even Tezos (XTZ) might one day join the party.
A rising tide … eventually goes out
Bitcoin and other tokens have outperformed most of the year until recently, and the largest cryptocurrency is cautiously and consistently trying to end the week on a positive note.
Additionally, there are a number of positives to be taken despite market uncertainty following Chef Nomi’s capitulation, which didn’t help sentiment at all and caused large-scale capital flight amid concerns of exit scams.
BTC fell below $ 10,000 after breaking out of $ 12,400 the week before and has remained around that key support level ever since. ETH had a tougher trend, however, falling from its highest level since 2018 ($ 485) just a week ago to a low of $ 322 earlier in the week before settling between $ 360 and $ 370 in the last few days.
As of Friday afternoon, there are indications that the market is building solid foundations before attempting to move up. Capital flight from DeFi eased and the unwinding of leveraged positions, as well as the flattening of the futures curve, also reversed.
Rumors of DeFi’s disappearance have been greatly exaggerated
DeFi may be down, but it’s certainly not out. New money continues to flow into existing protocols and, no doubt, more are being built. Monetary and community support will come with them.
Total frozen DeFi value (USD). Source: Defipulse
There is also another huge difference from the 2017 ICO boom: there is a much more established secondary market. The past couple of years have seen digital asset markets grow by leaps and bounds, largely due to the rapid maturation of projects and the people behind them.
In the DeFi world, traders can earn so-called governance tokens in exchange for providing liquidity for decentralized exchanges and lending protocols such as Balancer and Compound. Governance tokens can be used to rate improvements to underlying protocols.
This kind of incentive didn’t exist a few years ago when people invested money for vaporware on white paper and a prayer. Times are changing and DeFi could potentially lead the way.