Can DeFi Rise to Its 2022 Glory? Check the Metrics

Growth in DeFi Lending 

DeFi lending allows investors to lend their crypto holdings and earn interest. This lending activity is a good indicator of the sector’s health. Recently, active loans in the DeFi sector reached approximately $13.3 billion. This is a significant increase from the lows seen in 2023, when active loans dropped to around $3.1 billion. The rise in lending activity suggests more leverage in the market, which often signals the start of a bull run. 

Here’s a quick look at the recent trends in active loans: 

During the 2021 bull market, active loans peaked at $22.2 billion, coinciding with Bitcoin and Ethereum reaching $69,000 and $4,800, respectively. The decline followed, but the recent upswing indicates a recovery. 

Total Value Locked (TVL) in DeFi 

TVL is another crucial metric for assessing DeFi’s health. It measures the total value of assets locked in DeFi protocols. In 2021, TVL peaked at $180 billion. However, by October 2023, it had plummeted to around $37 billion. Despite this, the first half of 2024 saw a significant recovery. TVL doubled, reaching a high of $109 billion in June, and currently stands at approximately $96.5 billion. 

Leading this surge is the liquid staking protocol Lido, which has a TVL of $38.7 billion. Other significant contributors include the staking ecosystem EigenLayer and the Aave protocol, each holding over $11 billion in locked assets. 

Expert Insights and Market Trends 

Taiki Maeda, founder of Humble Farmer Academy, predicts a “DeFi renaissance” after years of underperformance. He points out that many early DeFi projects now have “high float, low fully diluted valuation (FDV)” coins. These projects have strong catalysts on the horizon, making them attractive investments. 

Maeda believes that Aave, a DeFi lending platform, is particularly well-positioned for growth. The increasing supply of its native stablecoin, GHO, and new initiatives by the Aave DAO to lower costs and introduce new revenue streams are positive signs. 

Current Market Cap and Token Performance 

Despite the positive trends, DeFi assets still hold a relatively small market capitalization share of just 3.4%. Aave, Curve Finance (CRV), and Uniswap are just a few of the well-known DeFi platforms whose native tokens are still down more than 80% from their peak prices. This indicates that while the sector is recovering, there is still a long way to go for these tokens to regain their previous values. 

In summary, the DeFi sector is showing signs of recovery, with significant growth in key metrics like active loans and TVL. While the market still faces challenges, the potential for a DeFi renaissance is on the horizon. This renewed interest could drive the sector to new heights in the coming months.