DeFi 800% Users Growth Reached All-Time High, Ukraine Geopolitical Tensions
Raging Against the TradFi Machine, Inflation is the New Normal
Happy Wednesday Everyone 🦄!
3 Things This Week
1. DeFi Users Reached All-Time Highs growing 800% 👉
Decentralized Finance of DeFi has become the hottest topic in the finance world. Data from Dune Analytics has shown that Ethereum DeFi Users Reached New Highs Over 4M this week, Growing Roughly 8x in a Year.
In Plain English, DeFi is a term for peer-to-peer financial services on public blockchains, primarily Ethereum. Instead of requiring a regular bank, to earn interest, borrow, lend or buy insurance, DeFi does not require paperwork or a third party because everything is replaced by a Smart Contract.
So here’s an overview of what TradFi is. Retail banks, commercial and investment banks, and also Fintechs. The JP Morgans, Paypals, Visas, Bank of Americas are all characteristics of TradFi. Basically heavily regulated institutions to ensure stability … or not… (Subprime 2008?) ….(Goldman Sachs’ 1MDB Scandal?)
In other words, TradFi has been sort of enjoying this sort of default operating mode for far too long while extracting too many fees as middlemen of the system.
So why are we seeing users flocking to DeFi? How will a Post TradFi world look like? What happens when the so-called Middleman is removed? In a perfect world, users won’t have to pay fees to big institutions. But in a DeFi world, we still have to pay gas fees.
Singular’s Take: Ethereum is like the gateway drug to DeFi but it is still expensive to transact. The good news is new Layer 2 protocols will be able to slash Gas Fees significantly in the near future.
2. The Macro: Ukraine & Russia Conflict Hype
This week, the Russia Ukraine conflict is all over the headlines as “geopolitical” tensions is replacing “interest rates” fear. Is this conflict overhyped?
How it Started
Russian troops amassed 10,000 troops along Ukraine border over the last several months, and U.S partners seemed to be involved in this as a potential opportunity to buy up busineeeses at a discount with a multi-year horizon.
3. Inflation Is Becoming the New Normal
Last week Fed announced that there are similarities between perceived excesses in financial markets today and the conditions that proved most dangerous for the economy during the 2008 financial crisis. From the peak of tech stocks, we’re now experiencing a pullback in Big Techs. A 20%, 30%, or 40% drop in some Blue Chip Tech stocks a.k.a “Pandemic Rockstars” the market failed to convince the Fed to move the policy lever.
The result? We’re seeing inflation with bigger bills at the grocery store and gas pumps. In plain English, the overall markets is transitioning to pandemic driven to a new normal: High Inflation and Rising Interest Rates.
While it is still unclear Fed’s plans to begin raising interest rates “soon” – possibly in March could tame inflation but whenever we hear “Transitory”, we want to be prepared for more volatility in the markets.
Singular’s Take: Whether or not you have a net worth of $10k or $1M, we believe inflation is becoming a new normal and the key is to position our holdings. Remember, everytime we hear inflation is “transitory”, there will be good buying opportunities.
“Spend Each Day Trying To be A Little Wiser Than You were When You Woke Up.” Charlie Munger
Quote of the Week:
“Human nature is one that looks at things in a linear stance. So we’re not very good at looking at exponential growth, which is obviously what bitcoin is doing.” Woo, On-Chain Analyst.
Meme of the Week: