DeFi Winter: Seeking Regulatory Alpha

Unlike most of the crypto asset class, many Decentralized Finance (DeFi) tokens, especially those related to crypto lending protocols, have not recovered since the May 2021 crypto market selloff.A "DeFi Winter" started after the May selloff most likely due to uncertainties around future regulations and requirements for stablecoin issuers and DeFi protocols.Although DeFi token prices continue to suffer, total assets committed to protocols (referred to as Total Value Locked (TVL)) continue to make all-time highs and currently sit at ~$250 billion.Leading DeFi lending protocol tokens, such as AAVE, COMP, SLND, offer asymmetric returns because of current regulatory uncertainties not only around their protocols, but also around stablecoins.We don't believe an overly aggressive DeFi or stablecoin regulatory regime will come to fruition for several reasons. Leading DeFi tokens should benefit.