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What’s in store for DeFi?

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Just how long the decentralised finance (DeFi) yield farming gravy train will last is uncertain. Out of 30 experts on Finder’s Cryptocurrency Predictions panel, 7% expect yields to collapse any day and a further 37% within 6 months. However, on the other end of the spectrum, 12% think huge yields will last beyond 6 months. The remaining 37% of the panel said it was too hard to predict how long yields will last.

Wave Financial Associate Andrew Ballinger is one of the panellists who cautions that the 100% per annum return cannot be expected to last in the long run.

“As more players enter the space, inefficiencies will be arbitraged away and yields will consolidate. These 100% per annum returns are based on a short time window and cannot be expected to hold across longer timeframes. That being said, I expect DeFi yields to stay compelling, and am eager to watch the space develop further,” he said.

DeFinite growth

Despite the uncertainty around the sustainability of DeFi yield farming, the majority (64%) of the panel believe DeFi will continue to grow in value locked and user count over the next 12 months.

Dr Iwa Salami of the University of East London cites DeFi’s potential in enabling financial inclusion as a catalyst for its continual growth. According to Salami, if developing countries would adopt DeFi, this may serve as a hedge against inflation that would enable them to preserve their purchasing power while still earning interest. She believes that there is also the matter of the efficiency and affordability surrounding DeFi that plays into its potential growth.

“…the system is more dynamic, resilient and transparent as DApps are open-source and interoperable, enabling developers to upgrade and develop more projects leading to the provision of more valuable DeFi services that contribute to the ecosystem. For all these reasons, DeFi is likely to continue to grow in the immediate term,” she added. CEO and founder Edward Hickman is also part of the majority. His own first-hand experience in onboarding thousands of users into DeFi led him to believe there is more to come.

“Taken as a whole, the industry is just too on-fire for decentralised finance to let go of it anytime soon. Expect decentralised versions of everything that’s ever been made in the legacy financial system and a whole new series of tools and functions that the legacy financial system simply isn’t capable of producing,” he said.

On the other hand, about a fifth of the panellists are left uncertain about the future of DeFi, including LMAX Group currency strategist Joel Kruger, whose uncertainties root from the rapid speed at which DeFi is booming.

“There is a lot of potential in the world of DeFi and the progress has been astounding thus far. While we believe the growth is there over the coming years, we’re concerned about the potential for a bubble burst that compromises growth prospects over the next 12 months, with things having run so far and fast,” he said.

Meanwhile, Ajay Strestha of the University of Saskatchewan is one of the few panellists who think the next 12 months will not bear DeFi growth. However, he remains hopeful that acceptance of DeFi apps will rise over time.

“Although prices for some of the DeFi coins have started the bearish trend, I am hopeful that the user acceptance of the DeFi apps will rise eventually. It will disrupt the current financial industry. The DeFi backed by the blockchain technology will thrive and rise.” 

Ethereum price forecast

According to some panellists, the recent success of DeFi will most likely bring an increase in the price of Ethereum by year’s end. On average, the panel predicts the end-of-year price of ETH to be at US$513. On top of reaping the fruits from DeFi’s boom, panellists attribute this to an anticipated appreciation after the ETH 2.0 launch.

By the end of 2025, this is expected to go up to $2,075 on average – a whopping 304% increase from the end of this year. OKCoin COO Jason Lau, who predicted an end-of-2025 ETH price of $2,000, expresses his confidence in the developer community as a reason behind his bullish forecast.

“Ethereum has by far the strongest developer community and most applications deployed. If ETH scaling solutions are successful, its brand power and track record, and ultimately demand, will only grow.”

Kruger gives a similar forecast and believes the current digital economy brings a promising future for crypto in general. However, he cautions that ETH has a lot to compete with that may hinder it from achieving the same growth experienced by BTC.

“Ethereum is at the front of all this when it comes to the innovation we’re seeing in the decentralised technology space. Still, there is likely to be more competition from other blockchains, something that will prevent ETH from growing at the same rate as Bitcoin,” he said.

For more, you can find the full report here:

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