By Shelly Melancon (Switzerland)
Despite the crypto market crash in March 2020 and May 2021, the world of decentralized finance has managed to stay afloat. The second quarter of 2021 brought to the fore the bearish events in 2020 and sent shockwaves across the entire cryptocurrency community. Following the invasion of bears into the market mid-2021, speculators arose just like in 2020 signalling the end of the road for digital currencies. However, the space of DeFi was not to be deterred.
Whilst the tongues of speculators were wagging, they were oblivious of the fact it was normal for the market to undergo corrections before going ahead to attain new heights. At least, the third Bitcoin halving in 2020 is a testament to this observation. The price of Bitcoin after laddering up to an all-time high of $64,493 careened down to $35k. Certainly, since the halving in 2020, Bitcoin has done a whopping 533% increase. At the time, Bitcoin was trading within the region of $9k to $10k. This puts the skepticism of speculators to rest even as the market is trying to recover.
Exponential Growth in DeFi Sector
The DeFi space has proven to be a force to reckon with in the crypto industry, attracting crypto investors and traders while the rest of the industry went to sleep. As an indication of its growth, according to reliable reports, the total value locked in DeFi protocols currently stands at $104 billion contrary to the $1 billion TVL recorded in 2020. Though the DeFi space has grown this much, it has encountered turbulent times over the past two years, which it evidently survived.
The mid-year market crash caused a $1 trillion reduction in total market capitalization that was positioned at $2.3 trillion. A series of events contributed to the market crash this year ranging from the Elon Musk factor to regulatory pressures and China’s mining ban. Despite this, activities in the DeFi sector went on unaffected. At the time, most crypto traders suffered losses as the crash was unexpected.
Most crypto enthusiasts were bullish about the month of May until they were hugely disappointed when the market capitulated. Activities on centralized exchanges reduced as people waited for the market to stabilize. In contrast, decentralized exchanges were overwhelmed by the influx of activities, leading to massive congestion and a spike in transaction fees.
DeFi Provides Numerous Options to Traders
DeFi protocols built on the Ethereum network were the most hit by the congestion. People paid more fees for transactions that cost less under normal circumstances. Notwithstanding, they provided respite for people and enabled them to make money via various means- yield farming, staking, liquidity provision, borrowing, lending. In essence, DeFi is the black sheep of the May crash, refusing to surrender. Contrary to speculations that DeFi is a lit candle in a raging storm, soon to be extinguished, it has proven its mettle. Not only did it provide options for traders and investors while their trading tools are locked up for a later use pending market stability, it poked holes in the traditional finance sector.
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