Despite already seeing huge growth this year, some investors believe the decentralized finance (DeFi) space has much more room to grow before the party is over, and that total value locked could still more than double in the next six months.
The latest prediction for the future of the DeFi market came from Kelvin Koh, Co-founder and Partner at crypto hedge fund Spartan Capital, who wrote on Twitter today that he believes total value locked (TVL) in DeFi platforms will exceed USD 5bn by the end of the year. Today it stands at USD 2.3bn.
Further, Koh also said that he originally considered making this prediction public at the start of the year, but didn’t do it because he thought it was “too bold and unrealistic.” Given the massive growth seen this year, however, this is no longer unrealistic, he argued.
Today’s prediction from Kelvin Koh comes a day after he shared a longer Twitter thread where he claimed that many people and large funds have missed out on this year’s DeFi rally. These people are now sitting on the sidelines “wondering if valuations are already too high,” Koh said, adding that, in his view, “we are still early in the DeFi cycle.”
“[…] valuations are no longer cheap, [but] they are not exuberant either,” the investor said.
If Koh’s prediction about the USD 5 billion deposited by year-end were to come true, however, the value locked in DeFi platforms would have to more than double in just six months from its current level.
However, according to DeFi Pulse, assets worth USD 1 billion were locked into DeFi platforms as of June 1, yet this passed USD 2 billion by July 7. That’s a doubling in a single month.
Responding to Koh’s prediction, members of the crypto community seemed to mostly agree with the investor, with, for example, Anthony Sassano, SetProtocol product marketing manager and author of the Ethereum-focused newsletter The Daily Gwei, reminding Twitter users that he made the same USD 5 billion prediction for DeFi at the beginning of 2020.
Others, however, went even further, with one user predicting we will hit USD 5 billion “before end of summer,” and another arguing that the year-end target is “likely conservative” given the growth rate over the last month.
Also taking part in the DeFi discussion on Twitter was Spartan Capital’s research head, Jason Choi, who argued that “the opportunity cost of missing massive rallies” is greater than the risk of losing money when the market turns, “if you know what you’re doing.”
Also voicing his opinion on the current state of the market was Su Zhu, CEO of Three Arrows Capital, who pointed out that all crypto projects these days “need a working product” before they will be taken seriously by investors. This is a “huge change” from 2017 and 2018, when “nearly everything was vaporware,” he explained.
Meanwhile, another startup investor, Qiao Wang offered some comfort to investors who have been left on the sidelines when he said that there are still “lots of legit sub-100M tokens” to be found for retail DeFi investors who are looking for undervalued tokens. According to Wang, many of these tokens are “so illiquid” and sometimes not listed on major exchanges, making them “uninvestable” for large portfolios.
“Opportunity to get in before price discovery starts,” he said.