Let the winter come

A year ago, I attended Token in Singapore. The mood in the industry was upbeat. Left and right, opportunities were ripe, and the atmosphere was bullish, electric, almost defiant. One hundred days or so ahead of the 2026 edition, it is an understatement that the mood has soured.

Winter has come

The top coins have all corrected in double-figure percentage points since their peak in the fal We have also seen what the Kelp exploit, one of almost $300M¹, did to confidence in the bridges that mesh together the ecosystem. And it is of no help that in much of the financial press, the I-always-knew-experts are doing the rounds to sing requiems to DeFi as a whole.

We can easily dismiss the credibility of the latter by simply remarking on their silence around the other price moves in gold in the past few months. But much of the rest of the noise is self-inflicted from over-eager advocates within DeFi. We still have not moved on from using the market cap of Bitcoin as a barometer for what DeFi is about. I think this needs to change.

Winters are not punishments

There is no such thing as an eternal spring. Winters are not strokes of bad luck, or a condemnation of the value of DeFi. I think they are actually good, and are part of the very design of an ecosystem that has earned its resilience.

On an intuitive level, there is no denying that a collective euphoria leads to poor choices in how we allocate our focus, our energy and our vision to the future of DeFi. Our field is distinctive: it brings together idealists, anarchists and pragmatists. But this strength in our diversity is also, at times, preventing us from achieving the necessary focus and discipline needed by the unavoidable fact that our resources and attention are limited.

DeFi also attracts its share of bad actors: rug pulls and treasury exploits, the kind of activity that, as long as DeFi remains technologically robust, will continue to surface. But as Buffett had it, the tide turns; and those who swim naked are revealed.

We have learnt a lot from past winters. The, at-times spectacular, collapses of projects have highlighted technological weaknesses which have defined new standards. Algorithmic stablecoins have, thankfully, almost disappeared after the Terra-Luna collapse². Stablecoins are now the most visible success of DeFi's integration to the day-to-day economy.

Catallaxy is a strength

In DeFi more specifically, such failures are transparent. This may be seen as a weakness that hurts confidence. But the test of whether the design itself can hold; and, when it fails, of being repaired in the open, has greatly accelerated the speed of innovation. Take MakerDAO's failed liquidation³; it helped create more robust auction systems moving forward.

This idea is one of catallaxy, a concept developed by Hayek, an Austrian-school economist who argued that no single planner can match the dispersed knowledge of many. In DeFi, that order arises from the same free evolution we see in protocols and code. And at the heart of it is a natural competitive process.

In survivors we trust

Winter is not a catastrophe; it is a testament that DeFi can adapt and grow. We now have had enough cycles, most recently in 2018 and 2022, to understand these are tests of the resilience of specific protocols; instead of a test of the legitimacy of DeFi as a whole.

We can draw parallels with traditional finance, where the most robust financial institutions have survived, and now command a measure of trust and respect. Each crisis was a test, and the system evolved and moved on. It has, arguably, grown more robust through that process.

DeFi is the proof that a system can be trusted more than the people who run it. Winter is when that proof is earned, and it's on these foundations that a new cycle of excitement arises. Winters are opportunities to elect, with our capital and acumen, the right direction for the next stage of development.

History is instructive. The last two long winters lasted twelve to eighteen months. They ended not because sentiment returned, but because new ideas were deployed by the people who watched the previous one fail. As we speak, this future of DeFi is being written.

Let the winter come, for the spring will be all the more beautiful.