Why is Chinese capital entering the DeFi field one after another in the cold winter of the epidemic and the economy?

Comprehensively analyze the financial and economic situation at home and abroad, and explore DeFi tutorials suitable for people at all stages.

In 2020, the global economy under the epidemic can be said to have entered a cold winter. A large number of companies have laid off employees, cut their businesses, are heavily indebted, and have frequent defaults. Even some international giants are not immune, and some can only ask the government for help or apply for bankruptcy protection.

At the same time, many offline physical industries have also suffered a fatal blow. According to statistics from S&P Global Market Intelligence , during the epidemic, nearly 100 companies in the US retail sector went bankrupt, including many century-old stores, and the number of bankruptcies was the highest since the 2009 financial crisis.

The most striking impact of the epidemic on the world economy is the capital market. In March 2020, the stock markets of dozens of countries had circuit breakers, and the U.S. stock market set a textbook record of four circuit breakers in two weeks. Buffett, the stock god, had to sigh with emotion.

Why is Chinese capital entering the DeFi field one after another in the cold winter of the epidemic and the economy?

Father Buffett lamented that the US stocks melted four times. It’s really a long time to see!

However, in the cold winter of each economic cycle, there will always be the next wave of wealth. Just like the Internet in 2002 and e-commerce in 2008, some industries are quietly emerging.

While most people are still confused about the next economic trend, the capital layout of global investment giants has just begun…

Where is the next wave of economic boom?

Beginning on October 24, 2019, during the eighteenth collective study session of the Political Bureau of the Central Committee, Xi Jinping emphasized that “taking the blockchain as an important breakthrough for independent innovation of core technologies” and “accelerating the promotion of blockchain technology and industry Innovation and development”.

Since then, decentralized finance (DeFi) has gradually received widespread attention from the cryptocurrency community, and has achieved rapid development in 2020, ushering in the “DeFi Summer” of the crypto industry .

Looking back on the achievements made this year, the development speed of the DeFi ecosystem is beyond imagination, and a few examples of data can be found to be hundreds of times.

For example, the amount of borrowed funds has increased by 170 times, the number of transaction users has increased by 140 times, the total amount of assets locked in DeFi’s smart contracts has increased by 140 times, and so on.

According to data from DeFi Pulse, the value of digital assets locked in DeFi applications has grown from less than US$1 billion in 2019 to more than US$10 billion in 2020, and once exceeded US$80 billion in 2021.

Why is Chinese capital entering the DeFi field one after another in the cold winter of the epidemic and the economy?

Data source: DeFi Pulse

Decentralized finance (DeFi) is redefining the future of finance. The underlying infrastructure that supports traditional financial applications is also undergoing major changes, changing people’s perceptions of licensing and control, transparency, and risk.

Chris, co-founder of venture capital fund Race Capital, believes: “The innovation speed of DeFi is 10 times faster than traditional Fintech applications.”

The traditional financial system is opaque, runs on a partial reserve system, and is vulnerable to market shocks. The difference is that the DeFi system is completely transparent and over-collateralized, which allows DeFi companies to survive the market downturn more effectively.

Why is Chinese capital entering the DeFi field one after another in the cold winter of the epidemic and the economy?

The emergence of DeFi has greatly optimized the infrastructure of traditional finance

News about the financial economy around the world continues. Seeing that the upsurge of encrypted digital currencies will come again, even if it is as conservative as our country, it has to speed up the pace of catching up.

And DeFi is the new situation of these digital currencies. As the front-line camp with the most momentum of development and the most representative, DeFi is expected to become the leader in the field of financial technology in the future.

Grasping the wealth contained in DeFi is the best opportunity for our generation to catch up.

Top VC accelerates the layout of the DeFi track

Summarizing the entire international financial market, it can be found that Chinese capital is suddenly more visible on the blockchain track.

Recently, venture capital funds such as Sands River Ventures, Lightspeed China, and Northern Light Ventures have all begun to pay attention to the DeFi track, and domestic Internet VCs have also begun to enter Crypto.

Why is the country so optimistic about DeFi projects under the overall financial downturn?

In fact, among the world’s top venture capital companies, there are not a few who have deployed the encryption industry——

  • In May of this year, the legendary Silicon Valley investment institution a16z, which invested in Facebook and Twitter, was revealed to be preparing a third crypto fund with a scale of more than 2.2 billion US dollars;
  • SoftBank, which has captured Alibaba, Didi, and Keep, is also deploying in the crypto industry, investing in a Brazilian cryptocurrency fund company;
  • IDG Capital, which has invested in more than 500 Internet companies such as 360, Baidu, Tencent, Meituan, and Pinduoduo, has never stopped its offensive in the encryption industry. Well-known encryption projects such as Coinbase, imToken, and Ripple have all been acquired by the company. in
Why is Chinese capital entering the DeFi field one after another in the cold winter of the epidemic and the economy?

From left to right:

Sequoia Capital Shen Nanpeng; Dragonfly founder Feng Bo; Ethereum founder V God; Meituan founder Wang Xing; Dianping founder Zhang Tao.

A more important milestone was the successful listing of Coinbase, a licensed cryptocurrency exchange in the United States, on Nasdaq in April this year, which allowed domestic investors who have been doubtful about the compliance of the crypto industry to see new possibilities.

As Vanessa, the founder of BTX Capital, said:

“Coinbase allows traditional investors to see that crypto exchanges can also be listed on the Nasdaq very legally, which means that investors have a legal and compliant exit mechanism.”

With the end of the era of barbaric growth of the consumer Internet, the demographic dividend that the domestic Internet industry relies on for development has gradually disappeared. The cost of acquiring customers has increased, traffic is no longer easily available, and the mobile Internet market has become saturated. Chinese Internet VCs who are used to the triumphant advance are now Had to look away.

When the compliance channel is opened, Crypto is an attractive blue ocean that cannot be ignored.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-is-chinese-capital-entering-the-defi-field-one-after-another-in-the-cold-winter-of-the-epidemic-and-the-economy/
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