{"id":86308,"date":"2020-10-10T14:30:00","date_gmt":"2020-10-10T11:30:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead\/"},"modified":"2020-10-10T14:30:00","modified_gmt":"2020-10-10T11:30:00","slug":"bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead\/","title":{"rendered":"# Bitcoin runs crypto markets, but DeFi tokens don\u2019t follow its lead"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2406d7d58ef\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2406d7d58ef\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead\/#Echoes_of_the_IPO_craze\" >Echoes of the IPO craze?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead\/#A_lack_of_BTC_correlation\" >A lack of BTC correlation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-runs-crypto-markets-but-defi-tokens-dont-follow-its-lead\/#A_looming_specter\" >A looming specter<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Bitcoin runs crypto markets, but DeFi tokens don\u2019t follow its lead <\/strong>&#8221;<\/p>\n<div data-v-17f60ba6=\"\">Decentralized exchanges have been around for a while now, but it\u2019s only been since the grip of decentralized finance mania has taken hold that they\u2019ve come into their own. The growth in DEX use has been nothing short of exponential, with volumes pretty much doubling in August and September compared with the preceding months.<\/p>\n<p>But is volume alone telling the whole story? Amid the DeFi frenzy, some of the biggest winners have been DeFi governance tokens. Kicking off with Compound\u2019s COMP token in June, other projects that followed suit have seen similar patterns. Yam Finance\u2019s YAM, SushSwap\u2019s SUSHI and BurgerSwap\u2019s BURGER have all seen massive popularity at launch, only for their price to start dropping once the initial hype dies off.<\/p>\n<p>Given the current data, it\u2019s relatively easy to trace a direct correlation between the meteoric rise of DEX volume and the craze for issuing governance tokens that, so far, have not been able to hold on to their value beyond the initial hype.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/95a350cd-e96d-4422-97dc-5cb6709bc2bb.png\"\/><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Echoes_of_the_IPO_craze\"><\/span>Echoes of the IPO craze?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Cryptocurrency has always borrowed terms and concepts from traditional finance. The idea of an initial coin offering is derived from its traditional cousin, the initial public offering. But while an IPO is a signal of investor confidence in the future of a company, ICOs were a free-for-all, allowing anyone to mint tokens, regardless of whether or not there was any demand that would generate value.<\/p>\n<p>With DeFi tokens, there is an already-established product that\u2019s providing some value to market participants. DeFi\u2019s governance tokens offer holders a future stake in the development of the product. In this way, DeFi tokens are more comparable to the concept of an IPO than ICO tokens ever were.<\/p>\n<p>However, after the lockup period of an IPO ends, most investors <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2019\/04\/03\/dont-be-fooled-by-the-unicorn-hype-this-year-most-ipos-lose-money-for-investors-after-5-years.html\">dump<\/a> their shares on secondary markets, according to findings from financial services firm UBS. This trend doesn\u2019t bode well for any early recipients of DeFi tokens, as they usually HODL. Of course, DeFi is very much in its infancy, so it\u2019s too early to draw any concrete comparisons. COMP, the token that kicked all this off, is only three months old. Omri Ross, chief blockchain scientist at trading platform eToro, believes that DeFi tokens should still be <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roached with caution:<\/p>\n<blockquote><p>\u201cThe jury is still out on the valuation fundamentals for DeFi governance tokens. Given the novelty of the space and the many complex factors going into evaluating the fundamental value of a token, the pricing of governance tokens remains highly speculative.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"A_lack_of_BTC_correlation\"><\/span>A lack of BTC correlation? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>DeFi tokens may show eerie correlations with IPOs, but they buck a bigger trend within crypto markets. With a few exceptions, most coins tend to follow the price movements of Bitcoin (BTC). Currently, DeFi tokens are an anomaly in that respect. While BTC has been trading within a relatively narrow range over the last month or so, DeFi tokens have shown price movements entirely uncorrelated to BTC markets. Curis Wang, co-founder and CEO of Bitrue \u2014 an exchange that recently started offering both decentralized and centralized finance options \u2014 told Cointelegraph:<\/p>\n<blockquote><p>\u201cI don\u2019t believe that their prices will end up following BTC. Most users and investors of these DeFi coins are pretty knowledgeable about DeFi, cryptocurrencies, and finance in <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>, and they understand that the functions that these projects are facilitating are going so far beyond what BTC was ever aiming to do.\u201d<\/p><\/blockquote>\n<p>All of these points raise some intriguing questions about the future direction of DeFi token markets. The concept of the IPO has sustained for decades. Investors still get excited enough to apply for an initial allocation of stocks, even if the numbers indicate they can expect to lose out. However, stock investors can, in some cases, hold their positions for decades. For example, Berkshire Hathaway has <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.fool.com\/investing\/2019\/11\/05\/3-stocks-buffett-has-owned-for-at-least-25-years.aspx\">held<\/a> stocks of Coca-Cola and Wells Fargo for over 30 years. <\/p>\n<p>In the notoriously fickle world of crypto investing, it seems a stretch to think that any investors would hold onto DeFi tokens for that long, particularly if their value continues to decline. Furthermore, there\u2019s also the question of whether the law of diminishing returns will kick in, which would mean that each new DeFi token entering the market would become progressively less valuable than its predecessors.<\/p>\n<p>In a segment that seems to be propelled by hype, it appears to be more than just a possibility. If this does happen, then DeFi tokens may start behaving more like longer-established altcoins. This behavior would see them quickly settling into a place in the token rankings that more accurately reflects their longer-term value and mirrors BTC prices more closely. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_looming_specter\"><\/span>A looming specter<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>All of this speculation doesn\u2019t consider the one factor that could kill investor appetite for DeFi tokens entirely: regulation. Despite DeFi\u2019s ambitions toward decentralization, few projects can claim to be truly decentralized. There are teams of people that maintain the underlying codebases, pay for the hosting of app data and take care of the user interfaces. <\/p>\n<p>All the DeFi tokens in the world won\u2019t stop the United States Securities and Exchange Commission or the Financial Crimes Enforcement Network from coming after anyone they believe to be responsible for contravening U.S. regulations, if and when the time comes. However, Wang still believes that the time has yet to come and that no regulation will be implemented in the short to medium term:<\/p>\n<blockquote><p>\u201cFirst of all, BTC has been around for a decade already and received widespread public attention at the end of 2018, but there is still almost no regulatory clarity around it in 2020. [&#8230;] Secondly, the whole point of DeFi is the decentralization aspect of it and when a project is open source, even if you somehow stop a team from working on a protocol, you can\u2019t stop others elsewhere from forking or building on top of it.\u201d<\/p><\/blockquote>\n<p>The recent charges against BitMEX have already highlighted the potential dangers crypto companies and platforms may face if discovered to be lacking in Know Your Customer and Anti-Money Laundering checks \u2014 DeFi included. Furthermore, CipherTrace has also stated that DeFi could make an attractive haven for money launderers. <\/p>\n<p>The fact that funds drained from the recent KuCoin exchange hack have made their way through Uniswap lends further credence to the idea. If the worst-case scenario happens, DeFi could go the way of the ICO, rendering DeFi governance tokens worthless as a result. EToro\u2019s Ross thinks that this issue will eventually slow down the current DeFi craze: \u201cDeFi products will likely face regulatory scrutiny as applications of blockchain <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> find increasing adoption amongst a broader community of users.\u201d He added:<\/p>\n<blockquote><p>\u201cAs the space will attract more funding, attention and regulation, which I think will be positive for the space, it may also require future protocols to integrate some KYC and AML building blocks.\u201d<\/p><\/blockquote>\n<p>But for now at least, DeFi tokens offer dizzying returns for yield farmers who continue to make hay while the sun shines. What\u2019s more, the craze shows no im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>te signs of dying down, even though token prices are currently declining. However, those who\u2019ve been around long enough to remember the post-ICO freeze of crypto\u2019s long winter would do well to remain cautious of history repeating itself.<\/p>\n<\/div>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener noreferrer\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/bitcoin-runs-crypto-markets-but-defi-tokens-don-t-follow-its-lead\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Bitcoin runs crypto markets, but DeFi tokens don\u2019t follow its lead &#8221; Decentralized exchanges have been around for a while now, but it\u2019s only been since the grip of decentralized finance mania has taken hold that they\u2019ve come into their own. The growth in DEX use has been nothing short of exponential, with volumes&#8230;<\/p>\n","protected":false},"author":1,"featured_media":86309,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/3f3cd97e-154e-4466-b03d-389ba935fd1f.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74862,74868,5007,70359],"class_list":["post-86308","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-bitcoin","tag-defi","tag-ipo","tag-stocks"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/86308","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=86308"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/86308\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/86309"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=86308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=86308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=86308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}