DeFi Mania Cools With Bitcoin Back in the Crypto Spotlight

DeFi Mania Cools With Bitcoin Back in the Crypto Spotlight:

As reported on Bloomberg, “The biggest casualty of the current Bitcoin renaissance? Cryptocurrencies linked to decentralized finance applications, the favorite darling of the digital-money crowd this summer.

While Bitcoin has climbed about 50% since early September, DeFi coins — used largely for speculation within apps that let investors lend to, trade with and borrow from one another — have tumbled after posting triple-digit returns just months earlier.

The DeFi Pulse Index that tracks performance of 12 DeFi coins is down about 26% since it was created on Sept. 9. Exchange FTX’s DeFi Index Perpetual Futures, which provides exposure to 25 different coins, is down about 42% since the beginning of September.

‘Token values for various DeFi projects are definitely declining quickly, as they probably should,’ said Vishal Shah, founder and chief executive of Alpha5, a crypto derivatives exchange who used to head principal investments and discretionary trading at Elwood Asset Management. ‘Most of the tokenomics for DeFi protocols have been built on farming, or pure degenerate gambling tendencies. Their longevity was questioned from birth.’

Over the summer, many investors embarked on so-called yield-farming strategies promising triple-digit returns. They’d lend and borrow within a DeFi app to earn fees and additional tokens as incentives, such as Comp, on a bet that everything would appreciate. In June, Comp’s token price nearly doubled before crashing…”

Continue to read the full story on Bloomberg.