The Crypto Crash Adds Pressure to DeFi Tokens Already in a Declining Spiral

<p>This weekend's crypto flash crash served to highlight the recent cooling of decentralised finance, which was once one of the most exciting sectors of the digital asset world.</p> <p>While Bitcoin and other rival coins have mostly stabilised or increased from Saturday's lows of about 20%, many DeFi tokens fell even further and have since failed to recover. The DeFi Pulse Index, which measures the performance of tokens such as Aave, Balancer, Compound, Sushi, Synthetix, Uniswap, Yearn, and Badger, fell as much as 24%.</p> <p>The slide follows a period of poor performance for tokens associated with decentralised finance applications — services that enable individuals to lend, borrow, and trade directly, without the use of intermediaries such as banks. Over the last seven months, the DeFi Pulse Index has fallen 62.5 percent. By contrast, Bitcoin is still higher than it was in mid-May, despite the recent slump.</p> <p>"For the majority of the last six months, DeFi has been out of favour and underperforming other sectors, and that trend continued over the weekend," said Jeff Dorman, chief investment officer at Arca. "However, other tokens recovered much more quickly, whereas DeFi remained depressed."</p> <p>Slump of DeFi Tokens</p> <p>The DeFi Pulse Index, which tracks key tokens, continues to decline.</p> <p>To be sure, the total value of money invested in apps — a proxy for usage — has increased 12 percent since mid-May, to nearly $100 billion, according to tracker DeFi Pulse. The services are geared towards a portion of the world's unbanked population of 1.6 billion people who lack access to traditional, centralised financial services. However, many investors have shifted their focus to coins tied to non-fungible tokens – frequently digital art – or games.</p> <p>DeFi has taken a beating in part because many of the tokens are held by a small number of people, according to Simon Judd, head of business development at Index Coop, which manages a Defi index fund.</p> <p>"Numerous DeFi tokens have extremely lo