We are ReWolt Venture Studio. We have been working with crypto projects since 2018, our portfolio includes more than 89 cases from different spheres: De-Fi, CrossFi, GameFi, NFT, worked with Tier 1-2 exchanges and launchpads among others. Our organization employs more than 50 people in different areas: community building, influence marketing, attracting liquidity, and listing on exchanges for strategic partners, we conduct token sales, NFT sales, and negotiate with VC, also our funder leads educational content in which he covers actual ways to generate passive income with DeFi.
What is the DeFi market today? What happened with the market after the 2021 hype and who is still investing in DeFi? How long to wait for further growth of TVL (total value locked)? What will the regulators do with this market? Let’s find out in this article.
Steps towards the creation of a decentralized finance (DeFi) industry have been made almost since the beginning of the crypto market, but the real breakthrough only happened in 2021, when a full-fledged industry was born in a very short time before our eyes. TVL reached $180 billion at the peak. Hundreds of protocols entered the market – decentralized exchanges, lending platforms, cross-chain bridges, yield aggregators, options platforms, and other demand-driven service protocols.
The DeFi market recreates the infrastructure of the traditional financial market, but with far greater speed, technology and transparency. At the center of it all is the concept of “Not your key – not your money,” whereby transferring your own funds to third parties (centralized exchanges, brokers, portfolio managers) makes your money not yours. With DeFi you conduct any transactions directly with your wallet. If it’s trading tokens, for example, you give one token from your wallet and immediately receive another in return. This process is managed by a smart contract, which eliminates any risks associated with human error, third-party bad faith, etc.
The market is directing users toward DeFi. When FTX, the largest exchange, collapsed in 2022 and users lost hundreds of millions of dollars, market participants finally began to see the point of switching to DeFi.
Some people argue that DeFi is too hard to use for the mass consumer and 2021 was just a temporary hype, but I notice that in the last year, decentralized finance has made a huge step towards user experience, and now there are more and more platforms on the market that even the most inexperienced user can work with. This is another trend in DeFi – simplification and mass adoption.
As for the hype year 2021, according to our funder/CEO Alfred Hamzin(https://t.me/AlfredinCrypto) the DeFi market performed even better in 2022 than in the “hype” year 2021, despite the record drop of TVL. Let’s take a look at the on-chain data.
According to Defillama, a record month of Dex trading volume in 2021, with a market capitalization of around $180 billion as of November 2021, was $291 billion, while in 2022, with capitalization falling to $50 billion, almost 4 times the average monthly trading volume exceeded $100 billion. That is, despite the decline and the clear bear market, DeFi has been used more actively.
At the same time, weak players, as it often happens, could not withstand the pressure of the crypto-winter, and left the market. And strong players became even stronger.
But in addition to the benefits for users of DeFi products and services, who will soon be able to use all the same financial services as in the traditional market, but without bureaucracy, efficiently and profitably, decentralized finance is also flipping the approach to investment for liquidity providers.
Together with the team, we dive into the world of DeFi and take an advanced look at different investment approaches/strategies with our students to maximize profits in the decentralized finance market. Learn more on our Telegram channel: https://t.me/AlfredinCrypto.
The financial market has existed for several hundred years. And all that time it has been governed by the same law. The main beneficiaries were those who gave people the opportunity to trade and speculate, hoping to make a lot of money. But all the time the money was flowing from traders to big investors, who invested their money in the creation of infrastructure for financial operations – to exchanges, bankers, and brokers. It was almost impossible for an average person to make money from the same model because it required a lot of capital, a team of developers, special licenses, etc.
However, in DeFi there are such opportunities for any investor. You don’t need large capital, licenses, investments in development to start earning on the same model as the leading crypto exchanges. Everything is already set up for that. You only need to master small technical specifics of using decentralized wallets for connecting to DeFi-protocols and develop your own strategy, after that you will start making a profit daily and sometimes even several times a day. This is another fundamental factor for future growth.
So, if everything is so good, technological, revolutionary, and profitable, why isn’t everyone still investing in this market? And how do regulators feel about it?
Unfortunately or fortunately, but most often investors follow the crowd, hoping to find that same hype, “Money” button, etc. And they lose on it. DeFi is not about fast money. This is about a stable 30-40-50% APR, but without speculation, with clear risks, and a risk management system. But most importantly, investing liquidity in this market really creates value. And this, in my opinion, is the key factor that your investments will earn dividends.
As for regulators, everything is not so straightforward. According to reports from central banks in various countries, we can see that government officials are aware of the specifics of the DeFi industry, they understand the technical and strategic parts quite well. They are not ready to fully accept this concept, but apparently, they also understand that simply prohibiting it will not help. People will find access, and they will just work and not pay any royalties to the country that tried to shut it down.
The only viable option, which is immediately visible, is the creation of additional centralized infrastructure, which would be, as it were, on top of the DeFi level. It would have KYC, AML, etc. The operators of such infrastructure will help investors get simplified and more secure access to the market, but in this case, we are no longer talking about decentralization. However, this approach is rather oriented towards institutional investors with a moderately conservative risk management.
When you dive into DeFi, you realize how quickly the most convenient tools and services have been created, such as instant loans on lending protocols (a similar tool in the traditional finance market is not available to most investors and is much more complicated and time-consuming). Soon, all those services that are now available in the traditional finance market will migrate to DeFi. And this will give a tremendous boost to our development. It’s just a matter of time before we reach $1 trillion TVL. Probably in the next three years.