Decentralized finance’s (DeFi) surging popularity might backfire and hurt the forward-looking sector, Waves Association founder Sasha Ivanov told Cointelegraph in a recent interview.
Ivanov compared DeFi to the 2017 ICO craze in a tweet earlier today, saying, “Please let's not make a new ICO bubble out of #DeFI.”
When asked to elaborate on his statement, the founder noted that he strongly believes in DeFi, but is worried about the hype surrounding it:
“DeFi is the future, but it's going to be coming through a bubble part of the cycle now, which can harm its long-term development.”
In Ivanov’s opinion, DeFi networks tokens “are clearly utility tokens, and do have a mechanics that gives them valuation”. However, he noted, “the pricing can be inadequate at times, which will lead to bubble-like situations”.
Even though DeFi might seem less appealing to uneducated investors than ICOs due to its complex structure, it is likely to suffer from volatility and sudden price drops, Ivanov continued:
“DeFi products are more sophisticated in nature than simple ICO tokens, which probably will limit the influx of non-qualified investors, but future inevitable volatility and price crashes can severely harm DeFi mass adoption perspectives, which would be very bright otherwise.”
DeFi’s popularity has been surging recently. As reported by Cointelegraph, more than 1,000 new DeFi assets were added in May, increasing by almost 10 fold over the same time last year.
Meanwhile, the total number of DeFi users over time is nearing the 600,000 mark.
Consequently, many DeFi-based tokens have been surging in 2020, with some tokens showing gains above 60% over the past week alone.