This week’s crypto sell-off has industry watchers wondering what if any, long-term effects it will have. Two shared their thoughts with Crowdfund Insider.
Kevin Rusher founded the real-world asset lending platform RAAC. He believes the sell-off is another reminder that DeFi needs more stable assets to build stability and trust.
“Today’s sell-off shows it’s time for the DeFi market to move beyond volatile crypto assets and explore more stable alternatives,” Rusher said. “Huge liquidation events like what we’re seeing (this week) damage DeFi’s reputation and erode trust. Many of the users that get flushed out of this market will never come back again, and that’s a problem if we want to grow DeFi into a major financial ecosystem.”
Rusher said the reason DeFi was born is because people were looking for a way to gain financial freedom without relying on banks and other centralized financial entities. But when crypto keeps tanking and liquidity keeps drying up, it’s hard to prioritize decentralization over stability, so DeFi must offer the same level of stability as a bank.
“The way to do this is by incorporating real-world assets into DeFi as collateral to borrow against, or a way to generate stable passive yields,” Rusher suggested. “Commodities like gold, real estate, or Treasury bonds are all far less volatile than Bitcoin or ETH, so it makes much more sense to use them as collateral. And now that we have more and more tokenized versions of these RWAs, DeFi can finally become stable enough to bring in mainstream users.”
Galxe co-founder Charles Wayn believes the sell-off is a delayed reaction to Bybit, rather than a long-term concern.
“The brutal sell-off happening in crypto is not unexpected considering we’ve just seen the biggest hack in our history, if not the history of all financial markets,” Wayn said. “This has been compounded by further fears over global tariffs, which have wobbled main stock markets, though by nothing compared to crypto where bitcoin is, at the time of writing, sitting below $88,000 for the first time since November.”
He added:
“This underlines that the sell-off is crypto-specific and likely exacerbated by (many) short positions that were automatically liquidated as prices plunged. Crypto is a battle-tested, weather hardened market that was able to survive a $60 billion sell-off overnight in 2022. And so Bybit’s $1.3 billion hack combined with a little bit of bluster over global trade tariffs that likely won’t materialize is not going to hold it back for long.”