The crypto market has taken a strange turn in recent weeks. What started out as a perfectly sustainable trend of rapidly growing DeFi projects, has turned into a weird world of worthless assets.
Rather than new money coming in, as one economist points out, it is crypto insiders who know better that are buying these worthless tokens, ready to gamble and speculate anyway. Is decentralized finance turning into a mini-bubble that’s ready to pop, or is this free-market experimentation at its finest?
Growing DeFi Trend Reaches Experimental Phase, Free Market Testing Innovative Investing
The fact that the crypto market remains highly unregulated is together the good, bad, and the ugliest part of it all at once. The positive is that it gives devs and other innovators plenty of wiggle room to launch new experimental projects in the world’s freest market.
The bad is that this means that some experiments can go wrong, and investors are left getting the wrong end of the stick. The ugly is that manipulation and bad actors remain, but crypto insiders at this point should know better at what to avoid.
Oddly enough, however, it lately is crypto insiders that are gambling the most, adding fuel to a blazing hot fire that’s bound to burn someone eventually.
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Recently, decentralized finance has taken off as an industry in and of itself. It is as if DeFi has detached itself from the rest of the crypto market, and is in its own miniature bubble, reminiscent of the ICO boom.
Just like then, Ethereum is soaring in value due to the projects being built and launched on the smart contract platform as ERC20 tokens. Projects are popping up left and right, and investors are getting rich overnight.
Uniswap, a decentralized exchange and “automated liquidity pool” where devs can launch new tokens of any type, has birthed a subset of cryptocurrency rejects designed to have no value whatsoever. Some of the descriptions of these projects outright claim to have no use case, yet liquidity is being pumped into these coins.
Some have pumped thousands of a percent in days, prompting even more money to flow into these coins.
Crypto DeFi 2020 has been a story of drastic repricing driven by profit-seeking crypto insiders, without much newcomer participation. Even in the cases where tokens are entirely worthless, this time most investors know they are speculating on worthless tokens.
— Alex Krüger (@krugermacro) August 14, 2020
Why Are Experienced Crypto Insiders Risking It All On Worthless Tokens?
The main difference between now and the ICO boom is that this isn’t new money getting duped into buying the next big thing. According to Alex Kruger, economist and crypto market spectator, this is crypto insiders who know the ropes, still willing to take a gamble on these nothing but speculative assets.
These same crypto insiders saw the rise and fall of ICOs, the bubble burst, and assets come tumbling down. But the allure of quick and easy money is often worth the risk for many. Further highlighting the issue, is the fact that several crypto investors are sitting in huge profit from an over 60% YTD rally in Bitcoin, and several hundred percent gains in many altcoins.
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The DeFi boom has reignited interest in crypto, and already a bubble may be forming. But this bubble appears to be contained to just DeFi only, and while it is having a positive impact on all of crypto, the biggest downside is in gambling on coins with zero value – yet that’s exactly what crypto insiders are doing.
Further hinting that a bubble is forming, is the fact that the crypto market fear and greed index has reached a level not seen since the 2019 top, and marks one of the highest readings in the index history.