- The crypto sector continues to battle masive contagion following FTX’s collapse and the 2022 bear market.
- Despite total value locked in decentralised protocols falling significantly amid the crypto winter, DeFi still shows considerable growth over pre-pandemic levels.
- Away from price action, DeFi and NFTs have shown massive potential to drive adoption.
In the depths of crypto winter it can be hard to predict where the next crypto bull run might come from – but the clues are certainly there.
While it’s too early to tell which assets will lead the market revival, the sector that will kickstart this rally is likely to be DeFi. Although not immune from the market malaise that’s permeated in the wake of the FTX scandal, the transparency and immutability on which DeFi is built have earned the industry plaudits amidst the recriminations.
Understanding why decentralised finance will be at the vanguard of any impending market recovery calls for a recap of how we got here.
Winter is here
The last crypto bear market had its roots in rampant over-speculation. The ICO boom of 2017 eventually led to the ICO bust of 2018, taking vaporware projects down with it.
This cycle has been markedly different. The crypto winter of 2022 did not start with blockchain – the chill blew in from the wider global economy.
It’s no exaggeration to say that the global economy has seen better days. Traditional finance and centralised systems have been rocked by a series of profound shocks, exacerbated by profound political mismanagement.
Despite this, crypto bucked the trend last year, holding out against the macroeconomic headwinds. Eventually, however, the price of bitcoin began to drop from its November 2021 high and the market began its multi-month drawdown, slowly at first and then quickly.
The first major domino to fall was Terra (LUNA) and its…
