After the explosive improvement of 2021, the recent economic downturn left a bitter taste for data encryption investors, especially those who vigorously promoted DeFi.

Since the sales market peaked in November 2021, investors have placed bets on both sides to address rare bullish signs.

However, Tera scandal brought this expectation to a sudden end in early May, adding fuel to the fire; Since then, CeFi has greatly relaxed. The speculation about what centralized service platform will follow Celsius, Voyager and BlockFi to the edge of data encryption continues.

The high leverage risk project investment approach used in pursuit of perfect profitability is an important factor in their decline. Investors are now thinking twice about the promise of high returns. Fully considering the rate of return is the strongest form of decentralized finance, and such prudence has already flocked to DeFi.

DeFi on camera

According to the elimination of manipulation of intermediate physical objects from the expression of the financial industry, DeFi users can (in essence) buy and sell without any verification friction resistance, have more control over their own assets, and get better sales with smaller intermediaries, including higher profits from the agreement.

As we have heard recently, DeFi is not independent of the high-speed development of the broader encryption market and even the macroeconomic environment.

Coingecko's DeFi index tracked the total market value of the first 100 DeFi contracts, showing the scale of operations destroyed by the economic downturn.

The following shows that the highest value of USD 172.2 billion will be reached on November 10, 2021, and then it will drop to the bottom by a large margin on February 22, 2022. Since then, the rebound has been reduced to US $142.8 billion, resulting in a vertical decline from May to the bottom of US $33.5 billion.

The loss so far this year is - 76%, which is equivalent to all the profits in the past 17 months. With the advent of reality, many people doubt whether DeFi can be repaired, especially considering that due to the substantial relaxation of CeFi, the verification of the return rate is becoming more and more strict.

Market status

Although the current market situation looks bad, the CEO and founder of DEFYIELD,Michael Rosmer did not have to worry. Rosmer sent an email indicating that although TVL has been flooded, the DeFi protocol is still in full operation - which is also difficult for some CeFi service platforms to do.

"Although the total market value and asset price locked by DeFi have already decreased, causing many investors to escape from the digital currency, most of the DeFi sales market is still in operation. You can see that investors in all platforms have declined significantly, but this is not enough to make us feel uneasy."

More importantly, Rosmer took Cardano as an example to actively keep pace with strong groups. The DEFYIELD service platform has maintained a large proportion of consumer groups during this period.

However, the recent trend of the situation does mean that an agreement must be drawn up to support his actions. This will translate into lower returns in a short time.

Future development trend

As for other forecasts for the future, Rosmer elaborated on the macro environment. He pointed out that the most important factor that harms DeFi at this stage is the continuous radical views of the Federal Reserve meeting. More importantly, what will happen in the last quarter.

"It is expected that the most important change this year will be that the Federal Reserve will significantly raise the annual interest rate again in recent meetings held in October, November and December."

He predicted further ups and downs in the near future. However, in the long run, with the interest rate increase gradually curbing demand and spending, the long-term market outlook will provide "rare breathing opportunities" to cope with inflationary pressures.

Rosmer said that although CeFi and DeFi have shown strong price relevance recently, and although they are obviously in the field of oppositional ideology, in the long run, DeFi will be stronger and better, "because he has been operating as expected - fully transparent"