The DeFi market faces challenges and opportunities, industry insiders share insights

After experiencing a highlight moment in the DeFi field in 2020, it now faces severe market challenges. The total locked value ( TVL ) has dropped from a peak of 179.1 billion USD in November 2021 to the current 37 billion USD, and the token prices of most projects have also seen significant declines. Even the governance tokens of leading projects in the industry have fallen by 90% from their relative peaks.

There are multiple reasons for the current market downturn. Some analysts believe that the token unlocks of early projects have created selling pressure; certain projects that overly relied on Ponzi schemes have been eliminated by the market; and the uncertainty of the regulatory environment has also impacted project operations. In addition, the capital flow back into mainstream assets like Ethereum during the bear market has also led to DeFi projects losing their previous liquidity premium.

Despite the overall market downturn, some projects that can generate real returns are still attracting attention. Traditional indicators such as price-to-earnings ratios are beginning to be used to assess Decentralized Finance projects, which is seen as an advancement in the valuation system. For example, the price-to-earnings ratio of assets like MKR has fallen below 25, which is considered to have entered a more reasonable valuation range.

In the current market environment, some low-risk yield strategies are favored. ETH staking and Maker's DAI deposit rate (DSR) have become popular choices. Maker provides users with stable returns by investing DAI collateral in short-term US Treasury-like products. Similarly, Frax has also launched the sFRAX product, offering competitive yields.

Looking ahead, industry insiders are optimistic about several directions:

1. Projects that can generate native yields are considered to have the potential to attract new users.

2. Decentralized stablecoins are still seen as the core of Decentralized Finance, especially in innovative models combined with RWA and liquid staking assets.

3. The infrastructure areas such as Web3 wallets, cross-chain solutions, and on-chain data are also receiving significant attention.

4. The integration of RWA is considered to provide broader application scenarios for Decentralized Finance.

Despite the current challenges, innovation in the DeFi space has not ceased. Many leading projects are still actively iterating, striving to adapt to market changes. Over time, these projects that persist in innovation may become a significant force driving the next bull market.