The current crypto financial market is witnessing a surge of innovative DeFi projects, with technological breakthroughs and diverse economic models capturing investor attention. Many consider these developments as key catalysts for the ongoing bull run. However, the more popular a project becomes, the higher its cognitive barrier grows—evidenced by tokens experiencing 10x to 100x volatility before investors can fully grasp their fundamentals.
In this context, how should we interpret market cycles? How can we identify genuine opportunities while understanding crypto finance's core principles? ChainCatcher sat down with Yang Zhou, Founder and CEO of Babel Finance—one of the few crypto lending institutions with decades of traditional finance expertise—to explore these questions.
The Nature of Market Cycles
ChainCatcher: Every industry has cycles. Where would you position crypto assets today?
Yang Zhou: It’s premature to call this an "industry cycle." Crypto is barely a decade old, and compared to traditional finance, its market cap remains modest (~$300B). User adoption is still niche, making it an experimental complement to mainstream finance rather than a mature sector. That said, early adopters have expanded from tech circles to broader audiences, enabling financial innovations that traditional systems struggle to replicate.
We’ve seen smaller cycles, like 4-year bull/bear patterns, but macroeconomics, industry trends, and micro-level hotspots (e.g., DeFi) collectively drive sustained momentum. For instance, DeFi’s liquidity mining boom creates short-term wealth effects, but its unsustainable models often lead to volatility.
ChainCatcher: How would you classify the current牛市 (bull market)?
Yang Zhou: Traditional finance distinguishes between technical and structural bull markets. Technically, we’re in early牛市阶段 (bull phase), with growing interest attracting new participants. Structurally, 2019 laid the groundwork, despite 2020’s leveraged pullback.
Macro factors like global monetary easing (e.g., the Fed’s $4T balance sheet expansion) act as tailwinds. Bitcoin, sensitive to dollar indices, benefits as a hedge against geopolitical risks—a "small long-term allocation, opportunistic short-term bet" for institutions.
Centralized Lending vs. DeFi: Coexistence or Competition?
ChainCatcher: With OCC allowing U.S. banks to offer crypto custody, how does this impact lenders like Babel?
Yang Zhou: Progressive policies take years to implement. Banks may lack crypto-native expertise, creating partnership opportunities for agile firms.
ChainCatcher: Does DeFi’s meteoric rise pressure CeFi players?
Yang Zhou: Not really. DeFi caters to speculation—users chase high yields or governance tokens. CeFi serves investors needing stable ROI. They’re divergent markets: CeFi for humans, DeFi for bots (for now).
ChainCatcher: How do you evaluate DeFi projects’ true value?
Yang Zhou: Utility precedes valuation. Most DeFi lacks real-world use cases today, so we assess potential rather than current worth.
Babel Finance’s Evolution
ChainCatcher: How did Babel navigate the March 2020 crash?
Yang Zhou: Hedging minimized losses. Our risk framework includes internal controls (e.g., hiring CFOs, lawyers) and external alerts (e.g., daily market briefs). We monitor client behaviors—excessive BTC borrowing signals套利 (arbitrage) demand, while sell-offs indicate peaks.
ChainCatcher: What’s next for Babel?
Yang Zhou: Securing a Hong Kong license to serve mainland high-net-worth clients. Post-National Security Law, HK’s stability boosts confidence in storing assets there.
👉 Explore crypto lending opportunities with Babel Finance
FAQs
Q: Is DeFi safer than CeFi?
A: DeFi’s transparency is double-edged—it exposes vulnerabilities. CeFi offers accountability via human intermediaries.
Q: What drives Bitcoin’s price long-term?
A: Macro liquidity and adoption. It’s increasingly a hedge akin to digital gold.
Q: How can investors avoid DeFi pitfalls?
A: Focus on projects solving real problems, not just tokenomics.
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