These Key Metrics Are Driving DeFi to 2022 Highs
The decentralized finance (DeFi) sector is witnessing a resurgence, marked by growth in key metrics such as active loans and total value locked (TVL) from their 2023 lows.
DeFi lending, an important component that enables investors to lend their crypto holdings in exchange for interest, is an indicator of DeFi participation and overall market health.
Active Loans Hit $13.3 Billion as TVL Soars By 160%
In a recent post on X, crypto market analytics platform Token Terminal reported a notable rise in active loans within the DeFi sector, now reaching approximately $13.3 billion, levels that were last seen in early 2022. The post added that the increase in lending activity suggests a potential rise in leverage within the sector, a trend often associated with the onset of a bull market.
DeFi waking up again pic.twitter.com/xrkQqCxGHE
— Token Terminal (@tokenterminal) July 31, 2024
During the 2021 crypto bull market, active loans in DeFi soared to a peak of $22.2 billion, mirroring the heights reached by Bitcoin and Ethereum, which approached $69,000 and $4,800, respectively. However, this number declined to around $10 billion by March 2022, eventually bottoming out at $3.1 billion in January 2023.
The total value locked (TVL) in DeFi also experienced a decline last year, plummeting 80% from a November 2021 peak of $180 billion to approximately $37 billion by October 2023. However, according to DefiLlama, the sector has also experienced a resurgence, with TVL increasing by around 160% to roughly $96.5 billion. Notably, DeFi TVL doubled in the first half of 2024, reaching a high of $109 billion in June.
Currently leading in locked value is the liquid staking protocol Lido, with a TVL of $38.7 billion. Following closely is the staking ecosystem EigenLayer and the Aave protocol, each holding over $11 billion in locked assets.
Expert Insights
Taiki Maeda, the founder of Humble Farmer Academy, has predicted that we might be entering a “DeFi renaissance” after more than four years of underperformance.
He noted that many “DeFi OGs” are now in the category of “high float, low fully diluted valuation (FDV)” coins with strong catalysts on the horizon.
I believe we are approaching a period of DeFi renaissance after 4+ years of extreme underperformance.
A lot of these DeFi OGs are now in the category of “high float, low FDV” coins with strong catalysts on the way.
Here’s why I believe $AAVE @aave is poised to outperform pic.twitter.com/gaTZpKOfdg
— Taiki Maeda (@TaikiMaeda2) July 29, 2024
Maeda gave the DeFi lending platform Aave as an example, which he believes is “poised to outperform” due to the increasing supply of its native stablecoin GHO and the Aave DAO’s initiatives to lower costs and introduce new revenue streams.
Meanwhile, despite the recent positive trends, CoinGecko data shows that DeFi assets hold a market capitalization share of just 3.4%. Native tokens for prominent DeFi platforms such as Aave, Curve Finance (CRV), and Uniswap are also still down more than 80% from their all-time highs.
The post These Key Metrics Are Driving DeFi to 2022 Highs appeared first on CryptoPotato.
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