Fears of an AI bubble and how the current market turmoil is good for DeFi generated a bonus Web3 Thoughts of the Week
Market turmoil is DeFi’s opportunity
“Downturns are uncomfortable, but they create the exact conditions where decentralized finance shines. When liquidity dries up and traditional markets pull back, DeFi keeps operating with the same settlement speed, the same transparency, and the same open access. The system does not freeze because there is no centralized gatekeeper to pull liquidity or change the rules.
“What we are seeing right now is the industry proving that its core value proposition is not yield or speculation. It is resilience. Protocols built on collateral, automated risk controls, and open market functions continue working through the entire cycle. They do not shut down, they do not gate withdrawals, and they do not depend on a balance sheet hidden in some bank.
“This downturn is forcing capital to migrate toward mechanisms that are transparent and predictable. That is why DeFi grows during periods when the rest of the market contracts. It is not a bet on high risk. It is a bet on systems that keep functioning regardless of the macro backdrop.”
– Sid Sridhar, founder and CEO of BIMA Labs
“Every time the markets wobble, you start seeing which parts of the system actually work, and DeFi keeps holding up better than people expected. You can feel this shift where people are, like, tired of waiting on banks or middlemen to get their act together.
“And if you’ve spent any time trading on-chain, you know unified liquidity matters way more than people admit. Same with proper derivatives for tokenized assets; without those, the whole thing feels half-baked.
“But we’re already seeing early wins. So, the chaos is unsettling, but it’s also the moment DeFi finally gets to prove it’s not just a cute experiment.”
– Hedy Wang, CEO and co-founder, Block Street
“Irrespective of current broader market sentiment, I am still very bullish on where DeFi is heading. Amidst the downturn, it is important to focus on actual utility, not hype. People are fed up with gatekeepers, and from our perspective, permissionless margin trading or lending on any token feels extremely timely and necessary.
“If there was ever a window for DeFi to prove itself, this is it.”
– Sky, founder of LIKWID
“In the midst of the current market downturn, it has become increasingly clear that on-chain identity and decentralized payments are essential components of a more resilient financial system. The instability we’re seeing highlights how dependent traditional infrastructure remains on centralized intermediaries that can fail, restrict access, or create bottlenecks at precisely the wrong moments.
“On-chain identity offers a verifiable, portable, and user-controlled foundation for participation in digital finance, reducing friction while enhancing trust and compliance. At the same time, decentralized payment systems continue to function transparently and without interruption, even as broader markets weaken. Together, these technologies demonstrate a pathway toward financial architecture that is both more inclusive and substantially more robust under stress.”
– Mori Xu, co-founder of Tabi Chain
AI bubble fears
“AI bubble fears are absolutely worth taking seriously, because yes, we are in an AI bubble. However, bubbles aren’t just excess; they’re also signals of a generational shift. What’s actually happening is that the real value is migrating upward from base model training (which is rapidly commoditizing around scarce resources like electricity, chips, and real estate) to the orchestration layer, where intent, coordination, and application-specific frameworks live.
“The big wild card is AGI. If we hit a credible level of AGI, the base-model layer becomes winner-take-all, and one model to rule them all. Short of that, the ecosystem will look much more like the dot-com era: inflated expectations, a painful correction, and then a Cambrian explosion of durable companies.
“It’s worth remembering that most of the real value of the Internet didn’t materialize until 10–15 years after the dot-com crash — social media, mobile, ride-sharing, e-commerce. AI will follow a similar arc. The hype will deflate, but the long-term transformational impact is not only intact — it’s inevitable.”
– Dylan Dewdney, co-founder and CEO of Kuvi.ai
“I keep hearing people say we’re in some kind of ‘AI bubble’, and it just feels off. Sure, there’s a lot of hype, but you can usually feel when something’s all smoke, and this isn’t that. Edge AI, especially, is actually taking off in ways regular folks don’t even notice yet, your phone, your car, even trivial appliances are suddenly getting way smarter without relying on some giant cloud server.
“And if you’ve ever tried building stuff on-device, you know the demand’s real. Companies aren’t throwing money at nothing. They’re scrambling because users expect instant, private, low-latency everything. So maybe prices swing around, but calling it a bubble ignores what’s actually happening right in front of you.”
– Chris Anderson, CEO of ByteNova AI
“We need to stop conflating speculative valuation bubbles with real technological transformation. At the outset, there certainly appears to be a speculative bubble—498 AI unicorns and companies committing trillions against billions in revenue proves it. But that’s what happens when world-changing technology meets investor FOMO. The market’s irrational; the technology isn’t.
“What the skeptics are completely missing is that AI is underhyped, not overhyped. Hallucination rates dropped from 38% to under 2% in four years. Autonomous vehicles outperform human drivers. Enterprises see 150%+ retention and measurable productivity gains. These are deployed realities, not promises.
We’re so early that expenses naturally outweigh revenues—that’s every platform transition. Amazon lost billions building AWS. The key insight: costs drop rapidly as industries mature. Training efficiency improves exponentially. Inference costs dropped 99% since 2020. When infrastructure costs drop 90% while capability improves 30x, economics flip from unsustainable to extraordinarily profitable – and this is where companies go from red to black.
“Don’t confuse overvalued companies—driven by FOMO premiums—with underrated technology expanding rapidly. The valuation bubble reflects psychology. The revolution reflects real capabilities reshaping economic activity.”
– Syed Hussain, founder and CEO of SHIZA (Shared Human Intellect Zonal Agents)
