Great Fundamentals vs Market Value: What is more important in a DeFI Project?
The DeFI Space might begin with only 1 project but as the years roll by hundreds of projects are listed on major exchange platforms every single day. At the time of writing, there are 26,325 DeFI projects listed in coinmarketcap.com while there are numerous others that are still in their initial ICO period. Some of these projects would go on to break milestones in the DeFI Space while some fade away as quickly as the hype is no longer there. So let’s take a closer look at some of these DeFI projects and discuss between projects that have great fundamentals vs high market value, which one should be your priority?
Does a Great Market Value Equal a Great Project?
The question above always comes up a lot during the early boom of the DeFI space as it is quite an easy approach to assume that if the market is willing to demand a higher value then the overall idea behind the project must be a good one but it does not always seem to be the case. These assumptions usually come from new people trying to enter the space and adopting the same traditional approach when choosing a project in the DeFI Space.
The DeFI Space might only still be in its early stage but over the years it has seen projects that will go on to be massive institutions while also experiencing some of those projects crashing down when reality starts to set in. It also saw some projects becoming a large ecosystem like Binance and Ethereum just to name a few and garner a massive following behind these platforms as adoption starts to grow rapidly over the years.
All of these trace its roots to the inception of Bitcoin which was a phenomenal invention when introduced in 2008. It marries Blockchain and cryptography technology to create the world’s first decentralized currency in a time when people’s trust in fiat currency was quite low. Bitcoin then acted as an alternative to the traditional financial system and its key role was to offer transparency which the world solely needs.
Of course, over the years Bitcoin and Blockchain was determined to be the next great invention after the internet was introduced in the early 90s as it solves a major problem in people’s life. With this perception in mind, it’s also quite natural that the early years of DeFI Space drew a lot of similarity to the times during the Dot Com bubble. The world was introduced to a new technology that people are not really familiar with and therefore valuation for projects using this technology was widely overestimated.
The similarities also continue as a lot of institutions are using this trend and hype behind the technology to boost the funding for their projects. While there are a lot of projects that claim to use the internet during the early 90s, only a few notable ones stayed when the dot com bubble burst in 2001. Some of these projects are as silly as Pets.com but some are everlasting as they can be like Amazon which still manages to thrive in the present day.
These similarities also run deep in the DeFI Space during 2021 with the boom of NFT and Metaverse which came crashing down during the winter phase in 2022. Even projects which were in the top 20 rank from CoinmarketCap such as FTX and Terra Luna also folded when the liquidity crunch started to hit hard last year. This is one of the basic points of view to see that a Great Market Value right now does not always mean the project has Great Fundamentals to survive in hard times.
Clearly, there are also plenty of examples of projects that have both Great Market Value and Great Fundamentals to back it up such as Ethereum. Ethereum introduced in 2015 by Vitalik Buterin has managed to build a great ecosystem that encompasses the majority of the DeFI Space and further expand the capability of the blockchain originated by Bitcoin. The project also has garnered a major community around the world and therefore it also has a great market valuation.
Value and Fundamentals are two major factors that should be interlinked with each other but the problem comes when there is major value and no fundamentals as what we had experienced during 2021. In the long run, crashes, or as we refer to winter in the DeFI Space will act as an eliminating factor to assess the right value for a specific project. Same as in the case of Dot Com Bubble, a few will remain and define the era for themselves using the new technology.
A few reasons as to why the DeFI Space is still in its eliminating stage is because there is still a lot of uncertainty within the DeFI Space. The DeFI Space was built to enable better transparency within the community but some of the DeFI Projects don’t even have a whitepaper or reports that can be used to assess their value. Even Though they do have a whitepaper, a clear attainable roadmap is sometimes not present as these projects try to achieve funding as quickly as possible.
This would not be the case if clear regulations are in place but countries all over the world are still trying to figure out how to regulate it. Once again without a clear unified regulation, some parts of the DeFI Space are still left unchecked to potentially collapse as the community also struggles to resist the temptation to join in the hype but without knowing the right valuation for the project. This also serves as another reason that Great Market Value does not always mean a Great Project as the community itself also sometimes struggles to resist joining the hype and research on the right projects.
This is why the word “DYOR or Do Your Research” comes up very often as it is an urge for the community to learn about the right projects before putting their savings into it. As there is so much hype and noise going around the community, we need to understand the project so we invest in a good project that has the potential to achieve Great Market Value in the future. But between a Great Market Value and Great Fundamentals, which one is more important?
Which one should you prioritize?
Both value and fundamentals serve a great function as a signal for us to look into a project’s potential maybe during the present or in a distant future. There are also cases where the hype behind a DeFI Project is so great that its value managed to increase very quickly but it also successfully delivered on all its roadmap to build an empire. Binance is an example of this as from its ICO in 2017, it has garnered a lot of attention with its view of becoming one of the largest exchangers and delivering on its promise within the next couple of years.
The key is to determine the right value for the current fundamentals of the project and join in with that right value in mind. The Fundamentals of the company such as roadmap and whitepaper should be your cornerstone in determining the present and the future of the company. If the fundamentals might be good right now but are turning sour within a couple of years then probably it is a good time to exit the hype before a possible collapse might happen.
These priorities will also vary on the duration of your participation in the project, are your perspectives more short-term or long-term? If you’re more of the short term then the Market Value of a project will be your key aspect but if you are more of the long term then the fundamentals will be the one you need to pay attention to as over the long run, the value of the company will always follow the fundamentals that back it up.
All in all, it is always fair to assume a perspective that not all good things are truly good while not all bad things are truly bad, it all just needs a closer look at which things are good or bad. The difference with the Dot Com Bubble is we have the internet now that constantly feeds us great information so our priority is to use it to our advantage to assess the right value for every project. The question is which DeFI Project will deliver the maximum value for us in the years to come?
We in Nagaya Technologies Pte. Ltd is well aware of the volatile nature of the crypto space and that is why we believe that a cryptocurrency should be more important than all to have a great fundamental value as a sustainable solution for the upswing in the market. That is why we decided to create the world’s first hybrid crypto asset called Nagaya with this idea in mind. Nagaya is a crypto asset that is backed by gold to strengthen its intrinsic value while also running subsidiary projects to continue to provide maximum value to all our HODLers. For more information regarding the latest updates on Nagaya and our whitepaper, you can visit us at nagaya.co
Or you can talk to us at t.me/nagayaofficial
