It’s been a brutal past two months for the DeFi market. While the fundamentals of this space are arguably stronger than ever as the total value locked in DeFi contracts and other metrics tick higher, coins pertaining to the space, along with Ethereum, have plunged from their summer highs.
While Bitcoin is pushing new year-to-date highs, DeFi coins are in the dumps.
One analysis by a crypto-asset analyst at the start of October indicated that the average DeFi coin had dropped 65 percent from its summer highs. Since that analysis, the state of the decentralized finance market has worsened as many Ethereum-based coins have continued their descent.
Though, Su Zhu, the CIO and CEO of Three Arrows Capital, says that the opportunity to short this altcoin sector has likely passed.
DeFi short opportunities may not be as lucrative anymore
While Three Arrows Capital has made its fair share of investments in the DeFi space, Su Zhu was one of the first investors in the space to predict a decline in this sector, or at least in altcoins relative to Bitcoin.
The prominent investor now thinks that DeFi shorts may not be lucrative investment opportunities from here.
He wrote on Oct. 30 that he doesn’t think “DeFi shorts have good r/r at this point” against the U.S. dollar, adding that he thinks “top-tier” projects are reaching points where long-term investors will deploy fiat to accumulate investments for the long run.
a roller coaster update:
i dont think defi shorts have good r/r at this point, v usd
long defi/eth cross could make sense
top-tier projects are approaching lvls where long-term investors will look to deploy fiat
i expect 95% of coins to be down v btc over the next few months https://t.co/NX2vQWef3v pic.twitter.com/YmkceYTIHp
— Su Zhu (@zhusu) October 31, 2020
Even still, he caveated this with the statement that “over the next few months,” he expects 95 percent of all altcoins to be down against Bitcoin.
He did not name which coins fit into this basket and which ones do no.
Don’t count out a further decline, top crypto analyst says
While the profitability of DeFi shorts may be in question, that’s not to say that this space has no chance of falling even lower from here.
Qiao Wang, a crypto-asset analyst and former head of product at Messari, recently said the following on what’s next for this cryptocurrency sector:
“I constantly update my views and unfortunately it looks like there’s going to be more pain in DeFi. Originally I thought we won’t see a 80-90% crash which is typical of alts because of the level of sophistication of DeFi investors but that thesis is being invalidated.”
He specifically highlighted the price action in four cryptocurrencies: Yearn.finance (YFI), Aave (AAVE), Uniswap (UNI), and Synthetix Network Token (SNX).
All four of these cryptocurrencies, which are at the core of the entire DeFi space, have all bled lower massively over recent days. The decline in these coins means that investors should be bearish on the rest of the DeFi space by affinity.
I constantly update my views and unfortunately it looks like there’s going to be more pain in DeFi. Originally I thought we won’t see a 80-90% crash which is typical of alts because of the level of sophistication of DeFi investors but that thesis is being invalidated.
— Qiao Wang (@QwQiao) October 29, 2020
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