Is DeFi a bubble? Two valuation methods tell you why investors continue to buy

ZB Academy
3 min readJul 24, 2020


The two valuation methods used in this article suggest that DeFi will continue to be hot and is not overvalued at the moment.Innovative protocols such as Aave and Synthetix have higher requirements than MakerDAO, commensurate with their potential growth.

The debate over the valuation of DeFi tokens has divided cryptocurrency investors. Is DeFi a huge bubble or is it reasonably valued?Two evaluation approaches can help provide some answers as to why protocols such as Aave and Synthetix have a premium value over MakerDAO.

Token valuation is an art, not a science

Investors and analysts clashed over how to assess the DeFi project.But that did not stop them from working with Numbers on a relative basis.Two approaches stand out today: the balance sheet and the locked total value;2. Innovation and growth potential.Both evaluation methods can be applied to all DeFi tokens.

Given the recent flurry of capitalization of DeFi, there are various opinions as to whether DeFi is currently undervalued or overvalued.Some investors think it wise to harness momentum while it lasts.Investors should be wary of putting their money into assets that have risen hundreds of percent in just a few months.

Evaluate the top four DeFi tokens

From an innovation perspective, Aave (LEND) and Synthetix (SNX) are definitely ahead of MakerDAO (MKR) and Compound (COMP).However, in terms of the absolute size of the assets on the agreement’s balance sheet, Maker and Compound stand out.But which is more valuable to the market: balance sheet size or innovation?

It is not enough to look at market values, since a larger balance sheet can reasonably indicate a higher absolute valuation.Dividing the market value by TVL helps this because it shows how the market value of the token moves with the value locked in its agreement.

Sources:DeFi Pulse,CoinMarketCap

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