In the months since DeFi first appeared, many blockchains, including Cardano, have redesigned themselves to incorporate the benefits of this new field.

However, Cardano’s creator Charles Hoskinson believes that all of DeFi space is just in a bubble. But the data analysis in the chain shows something completely different.

Charles Hoskinson – Founder of Cardano

Is DeFi In A Bubble?

DeFi can be considered the new fad or the next big thing, but it’s not a bubble. Mainly because the market capitalization has increased 8,589% since March 2020.

Ethereum has been leading this area for a very long time and even dominates 97% by January 2021.

DeFi market capitalization by 8.589% since January/2021 | Source: TradingView

Since then, however, the dominance rate has steadily declined and is only 69% at the time of going to press. The emergence of several blockchains compatible with smart contracts such as Binance Smart Chain and Solana could be the reason for this result.

relationship Ethereum’s dominance in DeFi has dropped to 69% | Source: Defi Lama

Additionally, with Cardano’s recent entry, competition is getting tougher. Strangely enough, however, the increased number of holdings meant that the TVL (total locked value) of ETH has risen by 525% since the beginning of the year.

Total blocked value of ETH.

Cardano founder compares DeFi with ICO

Charles Hoskinson’s testimony comes at a time when TVL is nearing the $ 200 billion mark in DeFi.

In a recent episode of the Word On The Block podcast, Hoskinson has speak:

“I think DeFi is in a bubble and that always happens with the newest sectors like NFT and DeFi. The same thing happened during the ICO revolution in 2017. “

At the same time, he emphasized that while this isn’t necessarily a bad thing, people overestimate its value, which leads to many new projects with lackluster development teams reaching valuations in excess of $ 1 billion.

The problem, however, is that DeFi is different from ICO in a number of ways. The first and most important difference is that DeFi has real use cases. DeFi allows investors, thanks to a wide range of services such as trading, lending, etc.

In addition, DeFi can provide traders with immediate value through liquidity. The opposite of this is that most ICOs never really produce anything useful.

In addition, a report von Blockdata really shows that DeFi is still in its infancy. If institutions / banks decide to invest only 1% of their AUM (assets under management) in DeFi, that place will be worth $ 1 trillion. This number is close to the market cap of the mainstream crypto space.

TVL DeFi when the top 100 banks add 1% of their AUM | Source: block data

With 55 of the top 100 banks invested in crypto, it wouldn’t be surprising that they also give DeFi a try.

Hence, Hoskinson’s comment is wrong, because if institutional interest grows, DeFi will continue to grow and will not be labeled a “bubble” whether endorsed or not.

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Minh Anh

According to AMBCrypto

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