The decentralized finance ecosystem has boomed in recent weeks. The funds involved and trading volumes have exploded. We should be happy, and yet more and more voices are rising to sound the alarm and speak of the dangers of this bubble.
Please let's not make a new ICO bubble out of DeFI
These are the terms that were shared by the founder of the Waves Association, Sasha Ivanov, on Twitter.
The remarks join those of Ethereum co-founder Vitalik Buterin earlier this week.
As for him, Sasha Ivanov was able to substantiate his statements during an interview with CoinTelegraph. So, although the latter is a fervent defender of DeFi, he fears that a bubble could "harm its long-term development".
Due to their relatively innovative delivery method, price discovery can take a long time and can lead to a speculative bubble. Of course, its explosion will drive prices down.
DeFi products are more sophisticated in nature than simple ICO tokens, which will likely limit the influx of unskilled investors, but volatility and inevitable price crashes in the future can seriously damage prospects for mass adoption DeFi, which would be very brilliant otherwise, he concluded.
Although the returns offered by DeFi are attractive, they are not without risks. The misuse of leverage, as well as all of the links between DeFi applications, could lead to systemic failure and result in investor losses.