Despite surpassing $100 billion in TVL, DeFi growth faces stagnation due to capital inefficiencies, regulatory caution, and market saturation, according to Credbull CEO Jason Dehni.
Points
- DeFi market TVL reached over $100 billion but faces stagnation.
- Inefficiencies in capital flow and poor treasury management contribute to slow growth.
- New regulations like EU MiCA and UAE VARA cause investor caution.
- Market saturation and decreased innovation are additional challenges.
- Traditional financial practices could help stabilize and expand the DeFi market.
Decentralized Finance （DeFi） has been a major driving force in the blockchain sector, initially leading the crypto boom of 2021. According to DefiLlama, the total value locked （TVL） in DeFi chains surpassed $100 billion in May 2024 after a year of market turmoil. However, despite this rebound, the DeFi market has struggled to regain its previous heights, with TVL levels still far below the 2021 peaks of nearly $200 billion.
Jason Dehni, CEO and co-founder of Credbull, has identified several factors contributing to the current stagnation in DeFi growth. One significant issue is the inefficiency in capital flow and liquidity management within the Web3 ecosystem. Dehni attributes this to the lack of prudent treasury management practices, a legacy of the previous super-cycle of 2020. The volatile and risky nature of the DeFi market makes fund management particularly challenging.
Additionally, new regulations such as the EU Markets in Crypto-Assets （
（MiCA） and the Virtual Assets Regulatory Authority （VARA） in the UAE are causing investors to exercise caution. Dehni notes that regulatory uncertainty is a significant factor, making investors hesitant to allocate capital to DeFi projects. This caution is compounded by market saturation, which has slowed the pace of innovation. As the DeFi space becomes more crowded, the emergence of new, attractive investment opportunities diminishes.
Dehni suggests that adopting certain traditional financial （TradFi） practices could help stabilize the DeFi market. These include better treasury management, diversification of assets, and the use of hedging strategies to mitigate volatility. By integrating these practices, DeFi projects can build confidence among investors and provide more stable returns.
The CEO also points out the challenges that come with incorporating TradFi methods into decentralized systems. One such challenge is the potential regulatory grey areas that could arise. Dehni references the ongoing debates and uncertainties surrounding token classification and compliance with anti-money laundering （AML） and know-your-customer （KYC） protocols. These issues highlight the complex balance between maintaining decentralization and implementing necessary financial controls.
Despite these challenges, Dehni believes that a collaborative approach between Web2 and Web3 can foster more efficient capital flow. Regulatory sandboxes, which allow for controlled experimentation with regulatory frameworks, could be a crucial step in achieving this balance. Such initiatives can help bridge the gap between traditional finance and decentralized finance, creating a more robust and resilient ecosystem.
Dehni emphasizes the need for Web3 projects to adopt more traditional approaches to treasury management if they want to stabilize and sustain their growth. While maintaining decentralized governance, projects should also embrace elements of financial assurance to attract significant capital and ensure long-term success.
解説
- DeFi’s growth faces significant challenges due to capital inefficiencies, regulatory caution, and market saturation.
- Integrating traditional financial practices can provide stability and build investor confidence.
- Regulatory uncertainty remains a key hurdle, necessitating a balanced approach to compliance and innovation.
- Collaborative efforts between Web2 and Web3, such as regulatory sandboxes, can enhance capital flow and foster growth.
- Adopting prudent treasury management practices is essential for the sustainable development of the DeFi ecosystem.