Taiki Maeda, founder of cryptocurrency analysis firm HFAresearch, said in a statement that the end of the bear market for DeFi is near. Maeda explained that the main factor driving and ending the previous DeFi boom was the gap between traditional finance (TradFi) and on-chain returns.
According to Maeda, traditional finance returns were so low in 2020 that capital was flowing into DeFi in search of higher returns. This led to an increase in DeFi’s total locked value (TVL) to over $200 billion in less than two years. However, when the FED began raising interest rates in March 2022 to combat inflation, the DeFi TVL fell as investors moved their money back to TradFi.
Maeda argued that DeFi cannot sustain its bull market until it offers higher returns than the risk-free rate in the traditional financial market, which is currently over 5%. However, analyst noted that this is now possible with the help of RWAs, which are assets that exist in the real world but are tokenized on the blockchain.
Maeda cited US Treasury bills (T-bills), which are interest-bearing short-term government debt instruments, as an example. Maeda noted that some DeFi protocols, such as MakerDAO, Aave, and Compound, purchase T-bills off-chain and pass the return on to on-chain participants. Analyst argued that this creates a lucrative business for DeFi protocols as they can collect fees from both sides of the transaction.
By staking treasury-backed stablecoins like sDAI from MakerDAO and borrowing other stablecoins like GHO from Aave, Maeda said users can cycle this process multiple times and get up to 10% annualized return (APY). told. This type of yield farming differs from previous ones, Maeda said, because it relies more on government interest payments, not on token inflation or ponzi schemes. He emphasized that this creates economic value and can be scaled without introducing too much risk. Maeda said that if DeFi can generate 10% returns on leveraged bonds, it will attract more capital and liquidity to the industry and rekindle its growth. DeFi-based altcoins include tokens such as Avalanche, UniSwap, Maker, Aave, and Fantom.