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The Ethereum DeFi space has seen a rapid correction from the euphoric summer highs. The prices of the best altcoins relative to this space have been corrected by 70 percent across the board. Yearn.finance (YFI), widely tagged as one of the most trusted cryptocurrencies in DeFi, has dropped to $ 8,500 from its all-time high of $ 44,000. This is an 80 percent correction.
The price correction of this cryptocurrency, along with others, has shocked investors.
DeFi has been tagged as the first killer use case for cryptocurrencies aside from payments. This industry has also seen increasing support from venture capitalists, including those both inside and outside the space.
Even with this underlying support, not everyone is convinced that DeFi will end soon.
A major fund manager in space recently reminded his followers that while DeFi may be down by more than 70% on average, more pain is entirely possible.
Isn’t the DeFi fix over yet?
The Yearn.finance correction is not isolated. Coins such as Aave’s AAVE, Uniswap’s Synthetix Network Token, and UNI were down about 70 percent from summer highs. The smaller and less recognizable tokens fell even faster and further.
This rapid drop has sparked a strong response from Crypto Twitter, with outside observers and insiders both offering insights into what they think will come next.
There seems to be a growing contingent of investors who think Ethereum tokens need to decline further, although they feel it is now a good time to start looking for long-term buying opportunities.
Ari Paul, CIO and CEO of BlockTower Capital, most recently shared his thoughts on the DeFi market.
Referring to a tweet he shared in September that predicted most of this bearish move, he said buying an asset at 85% lower than its all-time high is still not a reliable way to buy a fund:
“Has Defi already dropped 85%? This is a point to * start * looking for value, but remember that the 85% to 95% drop is another 65% loss. “
Paul added in his responses, however, that he thinks UNI and AAVE have good value acquisition products and mechanisms which could mean they surpass the average DeFi token going forward.
Paul isn’t the only one who has shared this thought process.
Qiao Wang, a prominent analyst who has been following DeFi for a while, said:
“I am constantly updating my views and sadly it looks like there will be more pain in DeFi. At first I thought that we would not see the 80-90% collapse typical of halts due to the sophistication of DeFi investors, but this thesis was invalidated.
Like Paul, however, she remains optimistic about the space as a whole and some projects. Wang explained that the amount of intellectual capital entering space is a reason to be extremely optimistic.
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