DeFi summer 2.0? ‘Gen 2’ tokens on a tear amid wider market slump

As some branded DeFi (Decentral Finance) tokens bubble up, a number of new projects have sprung up that are receiving strong offers due to aggressive earnings programs, generous air drops and significant technical advances.

It’s a series of outlier projects that are pushing both price and fundamentals, and has led a crypto-analyst, eGirl Capitals Mewny, to brand them as DeFis “Gen 2”.

feels like there is now a Gen 1 and Gen 2 of Defi-Token

The former is stagnating and the latter is stagnating

has nothing to do with basics. It’s all psychological

– mewny (@ mewn21) March 6, 2021

Mewny, who described eGirl Capital as “an organization that considers itself a very serious joke,” in an interview with Cointelegraph, said Gen 2 tokens are attracting attention due to their well-maintained communities and clever token distribution models, both of which lead the way have excited a “recursive” price-sentiment loop.

“I think in terms of market interest, this phase of the cycle is more about looking for novelty and narrative. Fundamental analysis becomes more important when the market cools and the utility is the only setback to valuations. Hot narratives tend to be based on base projects that have carved out a category in the market, ”they said.

While investors are keen to dive into these fast-growing new tokens, it is worth asking what the projects are doing, whether they are sustainable, and if not how far they still have to go.

Pumpamentals or Fundamentals?

The Gen 2 phenomenon is reminiscent of the “DeFi Summer” of last year, filled with “DeFi Stimulus Check” drops of air, APYs for fat farming and rising token prices as well as a harrowing flood of hacks, robberies and rugpulls.

However, Mewny says there is a population of investors who have emerged from this era and are constantly looking for technological advancement as opposed to shooting stars.

“There are less quick“ me too ”projects in defi. An investor may think that these projects didn’t attract a lot of liquidity at all, but they overestimate the wisdom of the market when it does. They have and are drawing liquidity, especially from participants who felt priced out or too late for the first pacemakers. This has given the floor to legitimate projects that, despite the shift in market focus, have continued to build. ”

One such Gen 2 riser that pulls liquidity is Inverse Finance. After launching a yield farming program for an upcoming synthetic stablecoin protocol, the Inverse Finance DAO narrowly voted to make the INV governance token tradable. As a result, the once worthless token airdrop of 80 INV is now priced at over $ 100,000, possibly the most lucrative airdrop in Defi history.

Another Gen 2 star is Alchemix – one of the first announced investments by eGirl Capital. The Alchemix protocol also focuses on a synthetic stablecoin, alUSD, but generates the stablecoin via collateral deposited in the profitable vaults of Yearn.Finance. The result is a token-based stablecoin loan that pays off – a new model that eGirl believes could become the standard.

“EMirl believes that trading in yield-bearing interest will be an important staple in DeFi. By quantifying and evaluating future returns, it releases a lot of usable value that can be reinvested in the market, ”they said.

The broader markets appear to be in line with eGirl’s thesis, as Alchemix recently announced that the protocol dwarfed a frozen total of half a billion:

Today is our one week anniversary and wow!

That was fast! 500 MILLION TVL!

Vault: 89.4 m
Transmuter: 90.5 m
Farms: 322.85 m pic.twitter.com/FQsezs6s9q

– Alchemix (@AlchemixFi) March 6, 2021

Stamina?

In contrast, governance tokens are in the red for 30 days for many of the top names in DeFi, such as Aave and Yearn.Finance. But even if the flagship names stall, DeFi’s closely watched TVL count has surged month-on-month, climbing over $ 8.4 billion to $ 56.8 billion per DeFi llama – advances that are in part on Gen 2 -Projects are based.

However, the comparatively wrinkled, parched dinosaurs from DeFi may still show some signs of life. Major updates are in the works on several large projects, including Uniswaps version 3, Sushiswap’s Bentobox lending platform, a liquidity mining proposal going through Aave’s governance process, and Balancers version 2.

These developments could mean that DeFi’s “Gen 2” phenomenon is simply a temporary, intra-sector rotation, and that the majors will soon be roaring back. According to mewny, it would be a foreseeable step who says: “Every defi-protocol needs at least one bear market in order to prove the technical soundness.”

In addition, according to Mewny, some of the signs of market irrationality in both Gen 2 tokens and in the wider DeFi area – such as triple and even four-digit agricultural yields – could have disappeared sooner rather than later.

“I don’t think it’s sustainable for a project under normal market conditions. We are not in normal conditions at the moment. Speculators have been putting in place potentially unsustainable DeFi protocols for some time. “

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