Crypto

After the crypto winter, is DeFi threatened to merge with the mainstream economy? – BeinCrypto France

DeFi has also suffered from the crypto winter. With the industry fully restored, the future of decentralized finance will be at a crossroads more than ever.

DeFi, the victim that draws the white flag?

With the apparent recovery from the crisis that the cryptocurrency is enjoying, the sector is licking its wounds and counting the companies that have disappeared. With companies like Celsius Network going bankrupt, DeFi consolidation seems more appropriate than ever. However, the task seems challenging as it combines restoring trust and creating a new operating model.

According to Kaaran Kalantari, spokesperson for WingRiders, the DeFi recovery could be jeopardized due to the difficulties the crypto sector is currently facing. Apart from bitcoin somehow clinging to the $20,000 threshold, the market has crashed. If before the winter it was estimated at $3 billion, now it has fallen by two-thirds.

The first safe-haven cryptocurrency would also expose the industry to the vagaries of the traditional market as well as inflation. This accumulation of factors could slow down the DeFi recovery. According to Kalantari, this could take several years. In the meantime, note that DeFi may still be transforming, becoming stronger or assimilating with traditional finance. The latter will ingest it until it is completely gone.

This is at least the bet the US Fed seems to be making. The latter recently published a study highlighting the main vulnerabilities of DeFi. Recent bankruptcies in this sector seem to have alerted the authorities. Indeed, the authors of the document insist on the need for tougher regulation. In fact, FED researchers recommend integrating traditional finance into DeFi. This can then create a framework similar to what exists in today’s markets. Otherwise, it will be very difficult for the authorities to regulate the industry if it becomes powerful enough to compete with banks.

Could this be the best asset in the sector?

However, despite its many vulnerabilities, DeFi could be the trigger for a crypto explosion. According to Kaaran Kalantari, current geopolitical events such as war and inflation could turn out to be beneficial for the sector. As Ukraine relies on cryptocurrency donations and non-fungible tokens, the industry appears to have become a safe haven during the crisis. A situation that will give DeFi an opportunity to win.

With fast transfers and openness to all, DeFi could outperform the traditional system and provide access to finance in non-banking regions. For Kalantari, it could even democratize the system of credit and borrowing. As for investments, savings and various incomes, they will also be more accessible to the population.

However, regulation worthy of the name is still needed to avoid abuse. Time will tell whether DeFi will merge with traditional finance or whether the latter can impose itself in the eyes of a population weary of economic crises.

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