Cratering Yields Sends DeFi Niche into Death Spiral

Falling yields and demand for popular governance tokens are ushering in an exit from DeFi platforms, flagging the DeFi bubble.  Still, protocols are actively responding with upgraded features and attractive incentives.

YFI, the governance token for yEarn Finance, gained 1,000% since the beginning of August to record values around $45,000. Currently, the token is down 68% from the peak.  

The price of governance tokens for top lending platforms Compound and MarkerDAO have dipped 60% and 30% from their respective peaks. Moreover, Aave has also corrected 50% from its top. 

The falling prices of these tokens have sent the DeFi ecosystem into a death spiral as the percentage return for liquidity providers (LPs) begins to fall alongside tokens. 

The LPs on DeFi platforms earn from the returns on the network (e.g., fees on Uniswap, lending rates on Compound) and selling their newly- mined governance tokens. 

Due to the boom in DeFi token prices, yield farming emerging tokens became the main incentive for LPs. Still, upward prices depend on buyers who are willing to purchase newly-farmed DeFi tokens continuously. 

yields do not magically appear because of better vaults or strategies (unless value is created)

yields exist as long as retards are buying the fuck token

and yields disappear when these retail buyers are dead from catching falling knives and no one else wants to do it anymore pic.twitter.com/mWoM80USLT

— 찌 G 跻 じ ⚡️