The crypto markets have gone bear this year, and the downturn of digital assets is greatly impacting many in the space. Due to fear of missing out, many have entered the market but are now quitting. Several investors have had their projects collapse hence left wondering what the market has to offer. The dust is still there, and investors must stay calm for the fluctuations to settle. Several reasons are behind the downturn of the market.
Lack of sustainable revenue
Being a new kind of monetary system, people expected yields at a rate that was not sustainable. The inflow of the payouts was insufficient; therefore, there was no value for the tokens provided. With the high yields at the beginning, many invested in digital assets. After a while, they realised that they could not earn the promised yields, which led to selling off the rewards. This sell-off has greatly impacted the prices.
The tokenomics structure
The structure of decentralised finance is that other assets do not back up the tokens. They are independent, and this is what makes the system decentralised. This structure has led to inflation time over time, leading to liquidity. Inflation is meant to increase the supply of the token, but when the value is not retained, liquidity vanishes.
User overleveraging
This led to a downtrend in the market since many tokens are in a state that is triggering crashes in the DeFi. When the market is bull, investors and lenders have high seasons.
What is the solution to the flaws that bring DeFi down?
There is a need to do the following to ensure that there is sustainable revenue in the crypto markets:
Mine more crypto and give rewards to the miners
Giving investors high yield rates leads to their withdrawal after realising that they cannot receive the rewards anymore. There is a need to encourage crypto mining and only reward after complete transactions.
Restructure cryptocurrency
This is done to amend changes to curb any flaw that could lead to a downtrend in the market. Any leveraged money should be intended to make profits because of overleveraging.
Conclusion
Cryptocurrency is a field that has many innovations, and that offers investors a variety of business opportunities. The factors that account for a downtrend in the market must be solved to ensure crypto investors join the market to trade and make their profit.
