Transparency, Transactions, Trade: Decoding The Triads of DeFi

DeFi is a system ahead of time and will continue to undergo major transitions with change in variables affecting the market.

DeFi provides a gateway for transparency.

Source : Getty

While decentralised assets continue to construct a stable position in the monetary system, the current market affairs seem to obstruct this development. The downfall of FTX has caused a major market mayhem, giving rise to negative sentiments in the minds of cryptocurrency traders. Nevertheless, the market mood did improve on the last day of the week, with the onset of the international football season. The fluctuating graphs of various cryptocurrencies might puzzle investors in unscrambling the factors affecting the value of the same.

No doubt, the decentralised market drew the attention of many active and ardent traders, especially from the millennial and Gen-Z groups. But the transparency factor continues to baffle prospective traders. It was the very aspect of anonymity that garnered cryptocurrency acceptance and approval by numerous digital currency users across the globe and took it to the Moon (or the prospective increase in price). At the same time, it was this aspect that called for regulations in the market, particularly to safeguard the interest of various crypto owners. While the imposition of regulations is still undergoing an on-and-off journey, it is essential to stay informed about the latest trends. 

Cryptocurrencies don’t have any inherent value as most of them are not backed by any hard-earned asset. This makes them mostly, if not completely, dependent on the simple law of demand and supply aka, market sentiments. When the valuation of any valuable asset is dependent on the mere instruments of demand and supply, rapid price fluctuations become a quotidian view. And this is where DeFi traders try their luck in the market through price volatility.

India is home to one of the largest percentages of crypto owners. Besides, the growing digitalization has encouraged many to experiment and adopt new assets as well as advanced ways of transaction. 

However, the technology is still young from the common man’s perspective. In addition to this, the fear of recession has taken over the attitude of trying something new. So, while the adoption of technology might take some time, there is a dire need for transparency. 

The upcoming G20 meeting might present a solidified solution to this issue. For active traders, while the volatility opens a door for high returns, it is crucial to remember that rewards and risks go hand-in-hand. Information and awareness are the keys to profitable trading in the decentralized market, or at least for now. 

DeFi is a system ahead of time and will continue to undergo major transitions with change in variables affecting the market.

Indeed, DeFi provides a gateway for transparency but some do believe that establishing regulations can better serve us all, as it will help the decentralised market to bring defined credibility to the system. The adoption of new form of transactions by large firms will in turn empower people to try the new form of digitalised assets. Moreover, transparency in the decentralized market can sow the seeds for reliable transactions along with stability in trade. Nevertheless, clarity is much awaited over the regulations that can govern the market. Until then, it would be interesting to watch the market road.

(The author is the Chief Strategy and Trading Officer at Vantage, a global multi-asset broker.)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.