Letter #14: Undercollateralized - The IronFinance ($TITAN) Boom & Bust
The prevalence of DeFi (aka Decentralized Finance) has increased exponentially over the past year as investors and crypto fans alike have rushed to cash in on protocols that can replace everything from banking and hedge funds to insurance and prediction markets. As of writing, over $58 billion USD is locked within various protocols, an increase of over 39x since the same time last year. And the market shows limited, if any, signs of stopping, as new DeFi protocols are seemingly released every week.
While DeFi markets may have something to offer by way of circumventing centralized companies that typically offer finance, banking, and other services, DeFi is not without substantial risks. Triple-digit annualized returns and moonshot token prices are followed by unhappy endings as often as not. Such was the case earlier this week with IronFinance, the latest DeFi darling to come crashing down to earth.