The Current State and Future of the DeFi Market: Opportunities and Challenges Coexist

Recently, the DeFi sector has experienced a period of stagnation. The total locked value ( TVL ) has dropped from a peak of $179.1 billion in November 2021 to around $37 billion currently. Even the tokens of leading projects, such as UNI, have fallen by 90% from their historical highs. This declining trend has raised concerns in the market about the future of DeFi.

However, some industry experts believe that looking solely at TVL data may not fully reflect the true state of Decentralized Finance. The changes in the market capitalization of stablecoins might be a better indicator. Falling from a peak of $190 billion to now $125 billion, it has only dropped by 34%, which is relatively mild. This indicates that a considerable amount of capital still remains in the market.

The reasons for the decline in DeFi token prices include: selling pressure from initial token unlocks, the disproof of certain project models, and increased regulatory pressure. Additionally, in a bear market, funds tend to flow back into base assets like Ethereum, causing DeFi projects to lose the liquidity premium they previously enjoyed.

Despite the overall downturn in the market, some projects that can generate real returns have begun to attract attention. Traditional financial metrics such as the Price-to-Earnings ratio (P/E) have been introduced for evaluation, which is considered a progress in the valuation system. For example, the P/E of assets like MKR has dropped to below 25, indicating certain investment value.

In the current environment, some robust yield strategies are favored. For example, staking ETH as wstETH through Lido, then using wstETH as collateral in a DAO to mint DAI, and subsequently depositing DAI into DSR can yield relatively stable returns. Additionally, opportunities on new public chains are also worth paying attention to, but it is important to be mindful of the balance between risk and return.

Looking ahead, industry insiders are optimistic about several directions: projects that can generate native yields, projects related to real-world assets (RWA), decentralized stablecoins, and infrastructure such as Web3 wallets and cross-chain solutions. These areas are considered to have the potential to drive further development of the Decentralized Finance ecosystem.

Overall, although the DeFi market has experienced a tough period, its fundamental value has not disappeared. In this rapidly evolving field, projects that can continue to innovate and adapt to market changes may stand out in the next bull market. For participants, focusing on projects that can generate real returns and have real application scenarios may be a more prudent strategy in the current market environment.