Laboratory for Signal Analysis
Laboratory for Signal Analysis
The October 10th crypto crash continues to cast a long shadow, and the decentralized finance (DeFi) sector is feeling the chill. FalconX's recent report paints a stark picture: only two out of 23 leading DeFi tokens are in the green year-to-date as of November 20, 2025. Quarter-to-date, this group is down an average of 37%. Ouch. That’s the kind of drawdown that gets investors sweating.
But beneath the surface, there's a more nuanced narrative emerging. The report highlights that investors seem to be gravitating towards "safer" names – those with buyback programs – or tokens with specific, positive catalysts. HYPE (down 16% QTD) and CAKE (down 12% QTD) are cited as examples of larger market cap names that have performed relatively well, possibly due to buyback support. Meanwhile, MORPHO (down 1%) and SYRUP (down 13%) outperformed their lending peers, thanks to idiosyncratic factors like minimal impact from the Stream finance debacle.
This "flight to safety" within DeFi raises a critical question: are these perceived safe havens truly offering refuge, or are investors simply rearranging deck chairs on the Titanic?
It's tempting to see buybacks as a foolproof strategy. Companies repurchase their own stock to artificially inflate the price, right? But in the crypto world, are buybacks a sustainable solution, or just a temporary Band-Aid? How long can a protocol sustain buybacks if the underlying revenue isn't there? And what happens when the buyback program ends? (Or worse, gets quietly shelved?)
Then there's the allure of lending and yield protocols. The FalconX report suggests that investors might be crowding into these names, viewing lending as "stickier" than trading activity during a downturn. The logic is sound: even when the market is tanking, people still need to borrow and lend. Lending activity may even increase as investors flee to stablecoins and seek yield opportunities.
But let's not get carried away. A closer look at the price-to-sales multiples in the lending sector reveals a concerning trend. The FalconX report notes that lending and yield names have generally steepened on a multiples basis, as price has declined less than fees. KMNO, for instance, saw its market cap fall 13% while its fees declined a whopping 34%. This discrepancy – a far steeper drop in fees relative to market cap – suggests that the underlying business is deteriorating faster than the market is acknowledging.
And this is the part of the report that I find genuinely puzzling.
How can investors pile into lending protocols when the fundamental revenue streams are shrinking? Are they simply chasing yield without properly assessing the risk? (A classic mistake, by the way). Or are they betting on a future rebound that may never materialize? The report suggests that investors may be looking to more fintech integrations to drive growth. AAVE’s upcoming high-yield savings account and MORPHO’s expansion of its Coinbase integration are cited as examples. But these are long-term bets, not immediate solutions.
The FalconX report also highlights a shifting valuation landscape within DeFi. Spot and perpetual decentralized exchanges (DEXes) have seen declining price-to-sales multiples, as their price declines faster than protocol activity. Interestingly, some DEXes, like CRV, RUNE, and CAKE, posted greater 30-day fees as of November 20 compared to September 30. We’re seeing similar trends across perp DEXes with HYPE and DYDX multiples compressing faster than declines in their fee generation.
This divergence between spot and perpetual DEXes raises another crucial question: is the market signaling a preference for perpetual contracts over spot trading? Are traders increasingly drawn to the leverage and flexibility offered by perpetuals, even in a bear market? The report suggests that investors expect perps to continue to lead. HYPE’s relative outperformance, for example, may point to investor optimism around its ‘perps on anything’ HIP-3 markets, which are seeing their highest volumes as of November 20.
But let’s not forget the bigger picture. The only crypto trading category seeing record volumes lately is prediction markets. This suggests that investors are increasingly interested in hedging their bets and speculating on future outcomes, rather than simply buying and selling assets. The cheapening in the DEX sector, therefore, may be warranted on lower growth expectations.
The post-crash environment in DeFi is a minefield of conflicting signals. While some investors seek refuge in buyback programs and lending protocols, the underlying data suggests that these "safe havens" may be built on shaky foundations. The decline in lending fees and the shifting dynamics between spot and perpetual DEXes paint a picture of a sector struggling to find its footing. According to a recent report, the post-crash environment has created a striking dichotomy in DeFi tokens The Striking Dichotomy in DeFi Tokens Post 10.
The rush to "safer" DeFi names feels less like a calculated strategy and more like a desperate scramble for stability in a turbulent market. The data suggests that investors may be underestimating the risks and overestimating the potential rewards. As Eric Peters wisely notes, "when prices fall even as most traders/investors think they should rise, there must be a reason. We just don’t know it yet. Sooner or later, we will." Maybe that "reason" is that there are no true safe havens in DeFi, only varying degrees of risk. The DeFi market analysis post-crash reveals key trends and investor shifts