Defi sector invites speculation

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blockchain

It’s not the size of the dog – it’s the size of the fight in the dog…

 

Proponents of decentralized finance might respond this way to new remarks by Ryan Watkins of the crypto firm Messari deriding the small size of the decentralized finance or “defi” sector in the greater blockchain economic world.

 

“(Watkins) has recently delved into the market values of the decentralized finance sector, comparing it to some of the other players in the crypto industry,” writes Martin Young at Cryptopotato this morning. “He concluded that DeFi is still a minnow despite its massive growth in popularity this year.”

 

Providing a chart showing that the entire deify sector is worth just over $4 billion while comparing that to a $4.4 billion market cap for Bitcoin Cash and a $6.6 billion cap for Ripple, Young cites these types of sentiments in a context that’s somewhat hard to parse, in terms of what markets are doing right now.

 

Defi might be small right now, but as financial advisors are fond of saying, “past performance is no guarantee of future results,” and also, inarguably, all new sectors start out small. That’s the nature of disruption.

 

What defi proponents are pointing to as indicators of future growth are the ways that this new type of finance eliminates the need for labor-intensive verification and opens doors to a different kind of financial world. There is ample belief flowing around the Internet that defi is going to boom in the years to come, but let’s just look at the last reported remark in Young’s story: Watkins suggests that defi doesn’t need more capital to continue to expand, just a “reallocation of capital.”

 

We take this cryptic sentence to mean that Watkins is suggesting if profits from Bitcoin and other top contenders were funneled into decentralized finance, decentralized finance would be bigger…

 

Each investor should look at the trajectory of defi and make decisions accordingly.

 

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