The founder of a crypto analysis company stated that the bear market in a specific altcoin group is approaching its end.
Additionally, a well-known DeFi analyst claimed that the decentralized finance industry is about to enter a new bull market, mainly due to the introduction of real-world assets (RWA) on the blockchain.
Taiki Maeda, the founder of cryptocurrency analysis firm HFAresearch, asserted that the bear market for DeFi is nearing its conclusion.
DeFi Boom and its Connection to Traditional Finance Returns
In 2020, DeFi experienced a significant surge in capital as investors sought higher returns due to low TradFi returns. This led to DeFi’s total locked value (TVL) reaching over $200 billion in less than two years. However, when the FED raised interest rates in March 2022 to combat inflation, investors shifted their funds back to TradFi, causing DeFi’s TVL to drop.
For DeFi to sustain its bull market, it needs to offer higher returns than the risk-free rate in the traditional financial market, which currently stands at over 5%. Maeda believes this is possible through the use of RWAs, real-world assets tokenized on the blockchain, which can provide higher returns and bridge the gap between TradFi and on-chain returns.
DeFi’s Higher Returns with US Treasury Bills: A Promising Opportunity
According to Maeda, DeFi can achieve higher returns by utilizing US Treasury bills (T-bills), which are interest-bearing short-term government debt instruments. Some DeFi protocols like MakerDAO, Aave, and Compound buy T-bills off-chain and pass the returns to on-chain participants. This approach allows DeFi protocols to earn fees from both sides of the transaction.
By staking treasury-backed stablecoins like sDAI from MakerDAO and borrowing other stablecoins like GHO from Aave, users can repeat this process multiple times and earn up to 10% annualized return (APY).
Maeda emphasized that this type of yield farming is different from previous ones, as it relies on government interest payments rather than token inflation or ponzi schemes. It generates economic value and can be scaled without introducing excessive risk.
He believes that if DeFi can generate 10% returns on leveraged bonds, it will attract more capital and liquidity to the industry, stimulating its growth once again.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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