Although decentralized finance (DeFi) has been seeing consistently strong growth, the gains in this Ethereum market sector have somewhat subsided over recent weeks. The exponential gain opportunities that were epitomized with yearn.finance (YFI) and Ampleforth (AMPL) are seemingly few as the market has become crowded.
Analysts, though, expect a secondary DeFi “frenzy” with the launch of the governance token of an Ethereum-based protocol.
The launch of the token in question was expected to take place last week, though the launch has been pushed back.
The launch of Curve’s CRV token could send DeFi into another “frenzy”: investors
One of the most popular DeFi protocols based on Ethereum is Curve. Curve is an exchange “expressly designed for stablecoins and bitcoin tokens on Ethereum,” according to its founder.
While a DeFi protocol, Curve is currently not 100% decentralized, with a group of individuals currently deciding the direction of the platform.
This is set to change with the introduction of CRV, a governance token for Curve that will be based on Ethereum.
Although details about the asset are still sparse because CRV has not yet been launched, DTC Capital head Spencer Noon expects for the cryptocurrency’s launch to have a ripple effect on all of Ethereum and DeFi:
“Cat’s out of the bag, this is correct. $CRV is likely the next big domino to fall that puts #DeFi back in a frenzy. That’s what happens when you’re critical infrastructure for farms, have huge daily volumes, plus a lean cap table. Watch 2nd order effects of this launch closely…”
Cat's out of the bag, this is correct. $CRV is likely the next big domino to fall that puts #DeFi back in a frenzy. That's what happens when you're critical infrastructure for farms, have huge daily volumes, plus a lean cap table. Watch 2nd order effects of this launch closely… https://t.co/Udh4GPQqJ1
— Spencer Noon (@spencernoon) August 6, 2020
This was echoed by pseudonymous DeFi commentator “DegenSpartan,” who remarked that CRV will “blast defi into overdrive.”
Ethereum DeFi’s growth is just starting
Although these comments may make it sound like DeFi’s future is dependent on the existence of one token, this is not the case according to analysts.
As reported by CryptoSlate previously, Mechanism Capital’s Andrew Kang said that from the perspective of an “insider,” he thinks that DeFi is in the earliest phases of its growth. He attributed this sentiment to the fact that only recently have retail crypto investors used DeFi, the introduction of certain innovations, and network effects.
Underscoring Kang’s comments, it is clear capital is entering DeFi.
Electric Capital, a cryptocurrency-focused venture capital fund, just announced the completion of a raise for a $110 million fund. According to Electric Capital, unnamed endowments and other institutional players participated in the raise.
This pertains to DeFi as Electric Capital partner/co-founder Avichal Garg, an investor in Anchorage, Near Protocol, Notion, and other companies, announced on Twitter that a focus of this fund will be DeFi. Garg specifically cited four DeFi ideas that they are looking to foster. In his words:
- Decentralized Market Maker: Can we build a decentralized Jump trading?
- DeFi Insurance: Risk mitigation is key as capital locked in DeFi grows
- Credit Scoring: Is there a way to do unsecured lending in DeFi?
- Robo Advisors: Wealthfront for DeFi
Other funds in the cryptocurrency space are also heavily investing in DeFi, with it becoming a focus for companies such as The Spartan Group, Multicoin Capital, and more.
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