An article to understand why the DeFi frenzy will be staged again this year

An article to understand why the DeFi frenzy will be staged again this year

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Original Title: Analysis: 3 Key Reasons for the DeFi Industry’s Upsurge Again

Messari data shows that in the past 30 days, most of the tokens listed in the website’s DeFi asset index have risen by more than 20%. Maker’s MKR, Synthetic Network Token (SNX) and SushiSwap’s SUSHI and other tokens rose more than 100% in the same time.

一文了解为什么说DeFi狂潮今年将再次上演

DeFi Asset Index Source: Messari.io

From January 1st to January 9th, the total locked-in value (TVL) of the DeFi industry rose from 15.678 billion US dollars to a record 23.092 billion US dollars. This recovery is a history set four months after the sudden end of the DeFi bull market. new highs.

Now that Bitcoin (BTC) and Ethereum (ETH) have soared to multi-year highs, investors have once again turned their attention to the DeFi field, which may be the beginning of a new round of bull market, the soaring TVL in the top DeFi platforms and the replacement of Ethereum The stable integration of the scheme is the main reason for the current surge.

Bitcoin and Ethereum drive the market higher

In the past few months, the bull market of Bitcoin and Ethereum has undoubtedly had a positive impact on the entire cryptocurrency market. At present, the total market value of these two digital assets exceeds 850 billion US dollars, accounting for 80% of the total value of the cryptocurrency market.

As the prices of top cryptocurrencies rise, some investors are looking for ways to maximize profits. The high mortgage yields and four-digit investment returns provided by many small tokens have proven to be irresistible to traders.

Historical data shows that when the prices of Bitcoin and Ethereum rise, altcoins tend to follow the rise, and when Bitcoin is consolidating within the “predictable” range, altcoins and DeFi tokens usually rebound. This market dynamic can partially explain the recent rise in DeFi tokens.

The total value locked is rising

Data from DeFi Pulse shows that in the past 10 days, the total value locked in DeFi agreements has increased from $15.36 billion to $22.74 billion. The sharp rise in TVL was accompanied by Bitcoin’s rise from $29,000 to the highest level in history of $41,950. At the same time, the price of Ethereum also rose from $740 to $1,300.

一文了解为什么说DeFi狂潮今年将再次上演

Total value locked in DeFi Source: Defipulse.com

Many high-profile cooperations and mergers between some of the top DeFi agreements have also attracted new funds into the DeFi field. At the beginning of December 2020, the two top DeFi projects Yearn.finance and SushiSwap announced the merger. The development resources of these two projects will be integrated, and the total locked value (TVL) will also be calculated.

This development helps to create a safer and more efficient user experience for community members, and in this case, it has also caused the YFI price to rise from $18,255 on November 26, 2020 to January 9, 2021. For 39,990 US dollars, an increase of 118%.

Increase in DEX trading volume

Transaction volume and transactions are key indicators used when evaluating the value of DeFi projects and the strength of their communities. One way to determine this is to look at the daily trading volume of the project’s decentralized exchange (DEX) to understand the value of transactions on this agreement within a specific time frame.

一文了解为什么说DeFi狂潮今年将再次上演

Daily DEX trading volume Source: DuneAnalytics.com

Since the beginning of 2021, the daily DEX transaction volume of the No. 1 DeFi project has increased from USD 900 million on January 1 to USD 2.4 billion on January 4, which has more than doubled, indicating significant user activity increase. This also shows that traders took advantage of the bull market conditions experienced by most of the cryptocurrency markets at that time.

With the launch of Ethereum 2.0, the key issues to be concerned about during any DeFi boom are Ethereum’s gas fees and transaction speed. Messari’s data also shows that DeFi tokens that focus on second-layer solutions have rebounded strongly, as developers are looking for ways to successfully integrate faster and lower-cost off-chain solutions that can be used as alternatives to Ethereum .

According to Cointelegraph, as developers continue to search for and experiment with second-tier solutions, tokens such as Solana’s SOL, Loopring’s LRC, Matic, and THORChain’s RUNE have all rebounded.