The past two months have been brutal for the DeFi market. While the fundamentals are arguably stronger than ever (as the total set in DeFi contracts and other metrics ticks higher), the coins pertaining to the room have crashed from their summer highs along with Ethereum .
An analysis by a crypto asset analyst in early October found that the average DeFi coin has fallen 65 percent from its summer highs. Since that analysis, the state of the decentralized financial market has deteriorated as many Ethereum- based coins have continued their decline.
However, Su Zhu, the CIO and CEO of Three Arrows Capital, believes the opportunity to short this altcoin sector is likely over.
DeFi short opportunities may no longer be as lucrative
While Three Arrows Capital has done its fair share of investing in the DeFi space, Su Zhu was one of the first investors to predict a decline in this sector, or at least in altcoins compared to Bitcoin.
The prominent investor now believes that DeFi shorts may not be a lucrative investment opportunity from here.
He does not believe that “DeFi shorts are making a good return at this point” against the US dollar. Rather, he believes „top tier“ projects will reach points where long-term investors will use Fiat to accumulate long-term investments.
Nevertheless, he restricts this with the statement that he expects „in the next few months“ that 95 percent of all Altcoins will fall compared to Bitcoin.
It is unclear which coins fit in this basket and which do not.
Better not to expect a further decline: Top cryptoanalyst
While the profitability of DeFi shorts may be questioned, that doesn’t mean that space doesn’t stand a chance of falling any deeper from here.
Qiao Wang, crypto asset analyst and former product manager at Messari:
“I keep updating my views and unfortunately it looks like there will be more pain from DeFi. I originally thought that we would not experience an 80-90% crash, which is typical for Alts due to the high level of development of the DeFi investors, but this thesis is currently being invalidated. „
He particularly highlighted the price campaign on four cryptocurrencies: Yearn.finance (YFI), Aave (AAVE), Uniswap (UNI) and Synthetix Network Token (SNX).
All four of these cryptocurrencies, which form the core of the entire DeFi space, have bled massively in the past few days. The decline in these coins means investors should be bearish to the rest of the DeFi space due to their affinity.