Andrew Kang explained why DeFi is not a balloon, with three factors.
When we look at the best performing altcoins in recent months, we see that most of them are decentralized finance (DeFi) tokens. As can be seen in the table shared by crypto analyst Taha Zafar and at the end of the article, we can state that DeFi tokens are growing parabolically. While Bitcoin gained 81% in the 90-day period, Aave, Kyber Network, Loopring, Bancor, Maker and Melon made over 100 percent gains.
This rapid growth comes to mind "Can a DeFi be a balloon?" brings the question.
After strong performances by DeFi assets, some names began to say that DeFi is a balloon and prices are inflated. As regards the unusual growth of DeFi, Weiss Crypto Ratings, the cryptocurrency division of market research firm Weiss Ratings, said, “DeFi is one of the most exciting things going on in crypto right now, but the idea that this industry will leave the rest of the market is ridiculous. Eventually the excitement will come to an end, and DeFi will trade in line with the rest of the market. ” used expressions.
In a recent statement, an entrepreneur capitalist Julien Thevenard said that Ethereum's DeFi industry is now a developing bubble.
In addition, the coins of DeFi protocols are traded at very large price-to-profit (PE) ratios of 100 percent to 4.360 percent. In fact, this is a situation that investors avoid in general. Investors think that such a huge increase will eventually explode.
“Balloon Thinking Wrong”
According to leading crypto venture investor and analyst Andrew Kang, the idea that DeFi is a balloon may be wrong. Kang attributes this to a number of trends.
First, Kang stated that the use of Defi “traditionally concentrated on hard users or ETH whales” and stated that only weeks ago there were only 1,000-2,000 addresses actively using Ethereum finance applications. Secondly, Kang stated that the Asian market, which enabled the huge growth of many altcoins during the 2017/2018 bubble, started to "feel FOMO".
Finally, DeFi touches on important points with on-chain liquidity, very good development tools, trainings and case studies.