A market pullback is a good opportunity to test the fundamentals and to review opportunities and risks across major DeFi sectors.

Lending protocols: AAVE is steady, while MORPHO has growth potential

AAVE is still the king of the lending sector, with fundamentals far stronger than in the previous cycle. In the last round, AAVE’s previous peak was around 500; if the market recovers in this round, there’s a strong chance of breaking through the all-time high. Compared with other lending protocols, AAVE is more cost-effective in terms of liquidity, asset safety, and market recognition.

MORPHO is a latecomer in the lending track, focusing on optimizing P2P lending; however, judging by its valuation, its cost-effectiveness currently falls short of AAVE. Betting on MORPHO requires more confidence in its future growth potential rather than short-term value-for-money.

DEX sector: mainstream vs. innovative models

The ve(3,3) model (AERO, etc.): although plenty of research has been done, I’ve never liked this model of stacking growth by depending on “blood-sucking” new projects. From a Ponzi-structure perspective, it’s hard to form large-scale applications, and it’s also difficult to gain mainstream market recognition.

Uniswap (UNI): Technological innovation is still ongoing. For example, Unichain could introduce new revenue mechanisms (fees + MEV revenue sharing, etc.). But judging from market performance, there’s a high likelihood that UNI will set new highs again in this bull cycle.

Curve (CRV): Current TVL is far below the last cycle. The key is whether it can absorb large-scale RWA and stablecoin settlement demand. If you want to position in CRV, a more稳妥 approach may be to focus on downstream target assets in its ecosystem, with more controllable risk.

IRS interest rate swaps: Pendle is still the absolute leader

Pendle has already become infrastructure in the DeFi space, and there’s no doubt it holds the leading position. Although the token price can swing a lot in the short term due to concentrated holdings, over the long run, DCA entries are still a solid strategy.

The biggest advantage is the team’s comprehensive capability. Compared with Spectra Finance, whether it’s product experience or protocol security, Pendle is clearly in a league of its own. In the long run, product experience, technological innovation, and security often determine the ceiling of DeFi development—and Pendle has no real weaknesses in these areas.

Perp DEX: high hype, but the valuation is questionable

Hype is extremely high right now, but the valuation is expensive—so I’m not buying into it for now.

AVNT has a big backer; there should be a second wave of行情 afterward

ASTER looks like CZ should keep “feeding” it; the rally probably hasn’t started yet.

The biggest issue with AVNT and ASTER: how to capture long-term value

If you can’t break through the asset-side constraints, you can only focus on fees, user experience, or airdrop-driven traffic. But none of those can form a long-term moat; it’s easy to get a quick surge in volume and then lose momentum for growth.

At present, the market still demands truly innovative products, not just simple pattern copying.

Stablecoin sector: ENA and WLFI

Ethena (ENA): hailed as one of the innovations in this DeFi cycle—well deserved.

Through structured products, it provides a new low-risk yield channel (funding rate) for DeFi users who don’t understand the technical side. It inspired many other stablecoin protocols, further stacking LEGO-like components across the DeFi ecosystem. Potential issue: the model is easy to replicate, so the final moat may only rely on BD—driving mass adoption to solidify market position.

WLFI: USD tokenomics with a Ponzi-like characteristic; fundamentally it relies on RWA yield. Whether it can build a moat in the future still depends on BD capabilities—whether it can layer returns into more DeFi LEGO blocks and the CEX ecosystem, gradually deflating the bubble.

Summary

The DeFi sector is still evolving rapidly. Some mature protocols (e.g., AAVE, Pendle) already have long-term value, while some emerging projects (e.g., WLFI, MORPHO) still have substantial growth potential—but they also face copycat risks and competitive pressure. The current market pullback is a good time to screen quality assets and optimize positioning.