Opinion: NFTs are at the end of their cycle, and new public chain DeFi will take over
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Opinion: NFTs are at the end of their cycle, and new public chain DeFi will take over
We're heading into another wave of DeFi—but not on Ethereum!
Navigating Web3 tides with focused insightsTranslation: Fabian Klauder
Compiled by: TechFlow
NFTs are the focus of everyone's attention. I am more excited about NFTs than ever before, and I genuinely believe they are revolutionary.
Now the question is how long the NFT craze will last, and whether DeFi can soon have another moment in the spotlight. Let us first explore the general nature of cryptocurrency hype cycles.
On Cryptocurrency Hype Cycles
In crypto, we’re seeing the same pattern again. A specific niche dominates market sentiment for a period, then forms a bubble that eventually bursts at some point.
In the summer of 2020, it was DeFi.
At the beginning of 2021, excitement grew around institutions adding Bitcoin to their balance sheets.
By mid-2021, retail investors went wild over meme coins, and gas prices skyrocketed as everyone speculated on the latest meme coin—despite having absolutely no utility!
Now, everything around you is about NFTs. Wherever you go, you hear people talking about NFTs.
That’s fine! In crypto, we always have hype cycles. But no one can deny these cycles always end at some point—usually when market participants start losing their minds.
The summer of DeFi in 2020 is a perfect example: when Compound introduced yield farming, things started slowly. Additionally, Kyber launched a token that generated cash flow, allowing KNC holders to receive a portion of protocol revenues.
The pattern is always the same: first, developers build great products. Then people get excited and tell their friends. As a result, everyone starts making money, prompting more projects to chase short-term gains.
That’s exactly when you know the hype cycle is ending. During DeFi summer, the biggest red flag was "food tokens." Whenever you see absurd products starting to dominate market sentiment… it’s time to leave!
NFTs Are at the Tail End of the Market Cycle
The same thing is now happening with NFTs. Don’t get me wrong—I love NFTs, and I believe they will change how we represent ourselves in the metaverse—but NFTs are clearly in a bubble right now. Remember the hype cycle pattern:
1. World-changing products enter the market
2. People become excited
3. Market sentiment shifts from long-term thinking to short-term profits
4. Absurd products dominate the niche
5. The bubble bursts
It all started with CryptoPunks. CryptoPunks have existed for years and are truly changing how we identify ourselves online. They are the faces of the metaverse.
I believe CryptoPunks are revolutionary and will continue to exist for many years to come.
But over the past few weeks, speculation around non-functional digital assets has gotten out of control. Too much useless content is being traded—you just need to browse OpenSea for a while to possibly encounter invisible NFTs.
In my view, NFTs are now in stage four, and another cryptocurrency hype cycle is about to end soon.
History doesn't repeat itself, but it rhymes.
Will DeFi Have Another Hype Cycle?
The question is: what comes after NFTs? We know public interest in crypto is usually cyclical. When one cycle ends, something else takes the spotlight from NFTs.
So what’s next?
Well, there aren’t many options. In my opinion, DeFi is long overdue for another bull run.
Why?
I have many reasons, but the most obvious one is that people simply don’t care about DeFi anymore because NFTs have entered a “bubble zone.” Just look at Google Trends.
Since May 2021, Google searches for “DeFi” have dropped by more than 50%.
I have no doubt that interest in DeFi will soon reach new highs again. What we’re doing is changing the world. We are reforming the financial system and building globally accessible, fair, open financial services for everyone!
But we need an accelerator—an element that can speed up the next massive wave of DeFi!
What better marketing is there than fast, simple, and scalable transactions? In my view, the next wave of DeFi won’t happen on Ethereum’s mainnet—it will take place on other blockchains.
We will see another wave of DeFi—but not on Ethereum!
To me, Avalanche, Solana, Cosmos, and others are clearly best positioned to beat you in the next “bull run.”
When it comes to DeFi, most people are now watching L1s, starting with Avalanche’s $180 million incentive program.
They announced that two major blue-chip DeFi applications, Aave and Curve, are deploying their protocols onto the Avalanche mainnet.
Meanwhile, SOL’s price is surging. The Cosmos ecosystem is expanding at an unprecedented pace… something seems to be brewing!
People demand fast and cheap transactions. They currently cannot get these on Ethereum; however, they certainly can on Avalanche and other new blockchains.
This also applies to Layer 2 solutions.
DeFi can experience another bull run on layers enabling fast and low-cost transactions—perhaps it will take some time before it begins.
But one thing is certain: once the NFT hype cycle ends, another crypto niche will capture public attention.
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