Analyst highlights 3 macro metrics that clearly show the growth of the DeFi sector


Decentralized finance (DeFi) has been one of the hardest hit sectors since the price of Bitcoin (BTC) was corrected from its all-time high in early May, as evidenced by the decline in Total Value Locked (TVL) across all logs.

According to data from DeFi Llama, the total value of decentralized financial platforms has dropped from $ 154 billion to $ 108.7 billion today.

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Total locked for all DeFi logs. Source: Defi Lama

While TVL’s roughly 30% decline in the past two months looks bad, year-over-year growth from $ 2.02 billion to $ 110 billion means a 5,500 percent increase for the entire sector.

Decentralized stock exchange volume reaches new highs

One of the best metrics for measuring sentiment within the DeFi ecosystem is the volume traded on decentralized exchanges.

According to Messari, the quarterly DEX volume at the end of the second quarter of 2021 was $ 404.9 billion, the highest ever.

Quarterly DEX volume. Source: Messari

This is an 11,751% increase over Q2 2020 and shows DeFi’s significant growth over the past year. It was also an 83% increase compared to the first quarter of 2021, which is evidence of growth in the second quarter despite the market downturn.

DEX volume was halved from $ 203.5 billion in May to $ 95.1 billion in June, a number that was still the third highest monthly volume ever.

Monthly DEX volume. Source: Messari

After a brief challenge to its dominance by PancakeSwap (CAKE) in April, Uniswap (UNI) is back on top as the dominant DEX, accounting for more than 40% of the total DEX volume.

Layer 2 protocols are becoming more dominant

Another emerging theme in the DeFi landscape is the growing importance of Layer 2 solutions like Polygon (MATIC), which help the Ethereum (ETH) network get higher scaling and lower fees.

While Polygon has already established itself as one of the first Layer 2 solutions for the Ethereum community, several other solutions are in the works that could challenge Polygon as the top solution.

According to Messari, the upcoming rollout of the optimistic rollups from Arbitrum and Optimism in the third quarter is “the most anticipated rollouts of these solutions” as they allow “thousands of transactions to be bundled into a single rollup block”.

connected: BarnBridge introduces application for maintaining portfolio weights of ERC-20 tokens

Bond markets are the future

According to Messari, fixed income products are “any instrument that generates steady and predictable cash flow, such as corporate bonds, treasury bills, and fixed income mutual funds.

The three categories of fixed-income investments include securitisations and tranches, fixed-rate loans and borrowings, and interest rate swaps.

Examples of some emerging fixed income DeFi protocols are Saffron Finance (SFI), Barnbridge (BOND), Yield (YLD), and Pendle (PENDLE).

Despite the short-term declining conditions across the DeFi landscape, the long-term view shows significant year-over-year growth and an increase in momentum for the sector as a whole as mainstream funding continues to open up to DeFi.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Every step of investing and trading involves risk, so you should do your own research when making a decision.