The 2017 bull market was driven by the crowdfunding of Ethereum-based crypto projects. Due to short-term irrational high returns, people rushed to enter, which in turn pushed up the prices of ETH and BTC, and finally the bubble burst due to the sell-off of BTC and ETH. In this cycle, BTC halved in 2016, laying the foundation for the arrival of the bull market, but it is Ethereum's crowdfunding and the super high returns triggered by crowdfunding that really promote the bull market. Of course, there are also big problems in this. First, such high returns are not sustainable because there is no fundamental support at all. The second is that there are a lot of garbage projects mixed in, and projects that are completely unrelated to the blockchain have joined this grand bubble.
The ancestor of the entire encryption field is Bitcoin, not only because Bitcoin pioneered encryption technology, but also because Bitcoin brought super high returns. The first batch of people who participated in Bitcoin, because the rise of Bitcoin brought a lot of benefits. This part of the proceeds was fed back to various subsequent encryption projects such as Ethereum, thus opening up the encryption ecosystem. From this point of view, no matter for whatever reason, whether you like Bitcoin or not, no matter how much ETH you hold, you should “show respect” Bitcoin, because Bitcoin is the true pioneer of the entire encryption field. No matter when, Its historical status must be respected. Of course, it is not impossible to surpass Bitcoin. All this depends on the scalability of open finance.
Since the first driving force of the entire encryption field comes from Bitcoin, Bitcoin's halving every four years has become one of the most important events in the entire encryption field. Because it is one of the most important foundations for the replacement of bulls and bears in each cryptographic cycle.
However, with the gradual growth of the Ethereum ecosystem, a more significant driving force may come from the ecological advancement of non-bitcoins, such as the development of encryption based on Ethereum or other public chains. The current most noticeable development is DeFi, Blue Fox Notes Since 2019, they have been paying attention to the progress of DeFi. At that time, many people thought that DeFi was just a hype, but now it has landed and has become an important base for promoting innovation in the entire encryption field.
Since 2020, the emergence of KNC, MKR, LEND, LRC... represents the trend of value flow. Will COMP, BAL, BNT...will receive more attention in the future? Who I don't know, but as long as they make progress, they will be closely watched by the market. This is perhaps one of the most rare opportunities for DeFi projects to grow.
If 2020 is compared to 2016, and the current market momentum is driven by DeFi, then the question is, can DeFi bring a super bubble like the original Ethereum crowdfunding? No one knows this, but the way will be different each time.
But it is almost certain that DeFi will also have a bubble, and there will be a process of de-bubbling in the future. According to the P/E ratio, the current P/E ratio of DeFi is extremely high, and there must be a bubble in it. Of course, this is true for the entire encryption field, which is not unique to DeFi. Compared to some highly valued projects, at least DeFi still has revenue and some fundamentals. And for some projects with extremely high valuations, whether from the perspective of ecology or the track, basically the proportion of the value of the investment part is very small.
What is different from 2017 is that DeFi, whether it is DEX, lending, or derivatives, is creating actual value, has income, and brings tangible benefits to its participants. Unlike the 2017 crowdfunding project, which is just financing, even if there is a bubble, it is relatively smaller than 2017.
Will DeFi become a cyclical hype, such as the former Aixiou, public chain, etc.? The hot spot is different every time. The cycle itself also has a large cycle and a small cycle. The big cycle is similar to the level of the bull-bear alternate. The small cycle is the ups and downs between the bull and the bear. Such as oracle, platform currency, Layer2, DEX, etc. The focus of each small cycle is different, and it must exist, and it is inevitable. No one can say that the next focus will be encrypted storage, encrypted cloud computing, or NFT or encrypted games, encrypted Internet of Things..., but periodic hot spots are inevitable. There is no shortage of hot spots in the crypto world, and so-called smart money will flow happily. Even so, DeFi is different from the previous hype hotspots. It has a real landing and support. Although it will encounter a certain ceiling due to the backward public chain infrastructure, these are not insoluble problems. The innovation of DeFi will not stop in the future, it will continue to attract people's attention.
DeFi is currently limited by the amount of users and the amount of assets involved, and it is still a small role, but it will continue to increase. With the maturity of Ethereum layer2 and the arrival of sharding, there are other public chains involved. DeFi has Opportunity developed into a truly important financial force, and finally evolved into a very important part of open finance.
Looking at the picture below, encrypted finance is still very young, not even a drop in the ocean. However, this is the space for open finance. It is higher than the sky and wider than the sea. It is a big world. Even if it occupies 10% of traditional finance, there is still a huge space.
(Data: Visual Captialist)
In the development of open finance, Ethereum will definitely benefit from the overall development. This is mainly due to the position of ETH as the underlying asset and its ability to capture transaction fees based on the Ethereum chain. In theory, it will push up the overall market value of Ethereum, otherwise Ethereum cannot carry such a large flow of value.
Finally, will open finance be inferior to traditional finance? Traditional finance is an important foundation for the operation of today's economic system and has mature regulations. But don't forget that under traditional finance, there are still many unsolved problems. In the movie "Margin Call" (Blue Fox Notes: Chinese translates this movie into "Storm of Interest"), the last statement of the Wall Street boss in the film:
"It's just money. It's made. It's a piece of paper, but there are some patterns on this paper...Compared with the past, it must be no different today. 1637, 1797, 1819, 1837, 1857, 1884, 1901 , 1907, 1929, 1937, 1974, 1987, 1992, 1997, 2000, 2008... the same reason, time and time again."
