5 bullish and 2 bear cases for defi in 2023 (opinion)

5 bullish and 2 bear cases for defi in 2023 (opinion)

The Defi world is still under the grip of fear and horror together with the rest of the crypto. The crypto winter 2022 continues without a clear end in sight. Since there is still no short -term soil formation on the market, some investors even wondered whether Defi is dead when he arrived.

But there are some inspiring data on the condition and use of the most famous defi ecosystems today. The winners will continue to play the next big crypto rally. They give crypto investors, developers and entrepreneurs equally great hope for the future of decentralized financing.

like the price of Bitcoin, the price of the other cryptocurrencies on the market increases. The falling price of all major defi-alt coins in 2022 was more about correcting the BTC bubble at the end of 2021. The price winter last year does not mean that there is no future for decentralized financing.

Although Defi blockchains drastically reduced the price of their market-traded cryptocurrencies in 2022, the engines on which they run are incredibly powerful. Over time, you will become increasingly powerful, with more advanced function upgrades such as increased security and absolute privacy with liquid keys and zero knowledge-proofs.

The long-term bull and bear cases for defi

Overall, the future of decentralized financing is optimistic for five reasons and pessimistic.

It's bullish because:

1) The problems of the centralized finances in 2022 are a strong argument for Defi.
2) The large defi cryptos have strong fundamental indicators.
3) The technology and security development is progressing super fast.
4) The established companies continue to carry out defi integrations. To invest defi coins.

It is bearish because:

1) The condition of the slaughter in the defi prices and some platforms is still real. Investors are burned and many are suspicious. It will be a steep ascent to gain trust when reliability and call improve.
2) The potential of regulatory threats and dangers for defi investments and business models still lurks over the area of ​​decentralized finances, as well as over the rest of the cryptocurrency.

let us dive!

Bearish: The State of the Carnage in Decentralized Finance

The market capitalization of the decentralized financial system was mercilessly reduced together with the rest of the industry last year. This is an understandable reason to remain pessimistic to defi-related cryptocurrencies at short notice. Especially without technical indicators that will soon signal a market floor for coins like Ethereum (ETH), BNB Coin (BNB), Uniswap (Uni), Polkadot (DOT) and Solana (Sol).

Ethereum experienced an astonishing decline in the TVL (Total Value Locked) by 76 % in the defi protocols. In January, the total value of all cryptocurrencies that were lended to stake or, as security for decentralized financial applications, was $ 95 billion to start 2022. He had dropped to around $ 23 billion by the end of the year.

This number is of course calculated using the fair value or fair price approach, whereby the average market price of the cryptocurrency on liquid stock market markets for crypto is given on the day on which the measurements are made to determine the TVL.

The cryptopoprices all crashed together with the Bitcoin price in 2022. Much of this significant decline in TVL is simply a question of slipping the market capitalization of Bitcoin and ether into the territory of buyers. Not everything is as bad as the Capital escape from the Ethereum platform-people take their blocked cryptocurrency when the contract runs and go with it.

Bärisch: Regulatory threats

Supervisory authorities everywhere, especially in the USA, make rounds with the entire cryptocurrency industry, and Defi is no exception. This is increasingly the case after a large number of protocols, bridges and even platforms were used for non -fungible tokens (NFT), which caused hundreds of millions to be stolen or compromised.

A pens about the pioneer that, if not in the USA, affects the Tornado-Cash developer Alexey Pertsev. The Dutch authorities recently extended his punishment and will remain in prison by February 20, 2023.

The entire crypto community apparently stands to defend the developer, although many argue that Tornado Cash is simply a data protection platform and that developers should not be liable for the way some people use them.

At the same time, it is becoming increasingly clear that regulatory authorities all over the world target the emerging area of ​​decentralized financing. The US stock exchange supervisory authority Securities and Exchange Commission has charged many teams because of the sale of non-registered securities, and it seems that the raid is just starting.

Bullish: CEFI Crash Highlight Defi advantages

A reason to be pessimistic about decentralized financing are serious concerns about their security level about cyber attacks. Defi apps suffered the main load of the losses from hacks in 2022.

Because there is no central supervisory switch, no accounting department that can make an adjustment to fix something that has gone wrong in your account because Defi is a place where the code is the law and everything that is possible through the code -Hacker love to target decentralized financial apps and users.

At the same time, this has created a natural attitude in the area of ​​violent cyber security, the platforms that did not suffer from larger hacks or technical setbacks.

And even if Defi is a hard test field for the most resistant distributed cryptographic network techniques, it looks pretty good in 2023 after the centralized finances have been in great difficulty last year.

namely:

The FTX exchange, once the third largest crypto exchange in the world, fell and burned together with her FTT token and the Alameda Research trade arm.

This was accompanied by Voyager Digital, which FTX had saved for $ 200 million before his own collapse.

These were just a few of the centralized financial collapse in 2022, with Celsius and Cel token ($ 4,7 billion insolvency problem), Three Arrows Capital ($ 10 billion in managed assets and $ 700 million failure) and the insolvency of blockfi (between 1 millions and 10 and 10 US dollars billion “).

This will stir up a great demand for developments that are resistant to the forces of human excess and remain growing, stable, autonomous, functioning solutions for blockchain ecosystems.

Bullish: strong fundamental data for defi cryptoplatt forms

The basic business model of the defi sector on cryptocurrency platforms is useful and profitable. It offers a wide open space for the development of web3 techniques and applications, a new limit of the Internet that is based on publication and communication in its financial development phase

The number of defi users (as extrapolated from the wallet addresses) rose rapidly from 2019 to the second quarter of 2022.

This is a very healthy use. Now the number of new wallet addresses that are created for defi applications has slowed down in the second half of 2022, but this can only be attributed to the crypto winter. This is not over yet, just like past crypto winter, but it will ultimately thaw.

According to the Dappradar data, the total value included in Defi-Smart-Contract was $ 40 billion at the end of November, with crypto faltering from the Alameda-FTX stock exchange crisis. This number will certainly swell together with the crypto prices when there is a rally. Investors put investors with their parked money.

Bullish: better security and data protection

Another reason to be optimistic about the future prospects of the Defi industry is the quality of your products and the quick pace of improvements to bring the essential promises of values ​​to your addressable markets.

take uniswap, for example the decentralized stock exchange that it managed to keep 50 % of the Dex exchange volume last year. It is always active, always in operation, always work the same, 24/7, crypto finance service machine.

The frictionallessness of his company and the avoidance of hacks or scandals have made it easy for this turbulent time of the crypto winter. The independent, distributed, unchangeable solutions of the protocol, which can be used in the entire Ethereum ecosystem, have introduced the Dex and the team behind their development and a reputation as one of the strongest brands in the crypto area.

Some of the state-of-the-art developments in crypto technology with numerous applications in the Defi sector include better security and privacy with secure computer-aided or "fluid" private keys for several parties and a zero-know -ured assure implementation in cryptographic authentication, authorization and bookkeeping.

Bullish: established companies make defi integrations

But another good reason to be optimistic about the future of Defi is the number of established companies that have already made defi integrations in their products and systems for their customers.

For example, Makerdao has teamed up with banks to provide decentralized financial loans with RWA (Real World Asset) supported collateral on the blockchain. If Makerdao it announced for the first time in the company history that it was a "commercial Loan participation between a regulated US financial institution and a decentralized digital currency.