Ryan Selkis, founder of the crypto market research institute Messari, predicts that the hype surrounding decentralized finance, i.e. financial services based on blockchain, will soon come to an abrupt end. He draws a comparison with the so-called Initial Coin Offerings (ICOs).
“The DeFi bubble will burst earlier than many expect,” said Selkis in a tweet on September 10th . And further “We are nearing the end of the pyramid system, next steps are exits and jumps, and the rising Bitcoin Era app fees will eat up the profits of small investors.”
In recent weeks, more and more DeFi projects have emerged from nowhere that promise adventurous interest income
Many of these projects reaffirm their legitimacy in order to attract investors and then to jump out with the collected money, as is the case with so-called pyramid systems or pyramid schemes.
The most recent example of such an approach is the DeFi project SushiSwap, suddenly money from the Development Fund of the project whose anonymous founder, who is known only by the pseudonym chief Nomi taken has and thus caused the crash of the associated crypto currency. Meanwhile, Chief Nomi has the funds again returned , but remains a stale aftertaste.
“The ICOs also had a hype because everyone believed that there would be a crypto currency for every industry,” as Selkis explains his thesis in another tweet . In this regard, he adds: “The DeFi are a big chunk of money that a group of insiders pushes back and forth, who soon find no more victims to exclude.”
The “Initial Coin Offerings” (ICOs) alluded to by Selkis had a similar hype in 2017 as the current decentralized financial services. The “token sales” were a form of capital raising in which companies could raise investment capital by introducing their own cryptocurrency.
Even then, the question of the legitimacy of the business model arose in many projects , which now again raises great doubts in many DeFi projects
Selkis states that he is quite open to counter arguments, but he currently sees the industry as “too lucrative to be true”. He also emphasizes that he does not speak out against the concept of DeFi as a whole.
“Just to be clear, I LOVE this experiment. Just like the ICOs back then, DeFi projects are an innovative idea. Smart people can get rich with it, but I don’t recommend DeFi to most people because I don’t recommend poker beginners playing with the big boys in Las Vegas. ”
Ultimately, the DeFi are a step forward for the crypto industry nonetheless . Even if there will be setbacks, they are naturally to be expected.