Total value locked in DeFi fell 66%, but multiple metrics reflect steady growth
Decentralized finance TVL down 66%, but growth in DEX aggregators, active addresses and steady fundraising show that the "DeFi winter" is not with us.
Market analysis
Aggregated Total Value Locked (TVL) in the crypto market measures the amount of funds deposited into smart contracts and this figure has risen from $160 billion in mid-April to today's $70 billion. the lowest level since March 2021. While this 66% contraction is concerning, there is plenty of data to suggest that the decentralized finance (DeFi) industry is resilient.
The problem with using TVL as a broad metric is the lack of detail that is not displayed. For example, the number of DeFi transactions, the growth of layer 2 scaling solutions, and venture capital inflows into the ecosystem are not reflected in the metric.
In DappRadar's July 29 Crypto Adoption Report, data shows that the number of DeFi 2Q transactions decreased by 15% from the previous quarter. This figure is much less of a concern than the devastating drop in TVL and is supported by a 12% drop in the number of unique active wallets over the same period.
Layer-2 is the path to sustainable DeFi growthIakov Levin, CEO and Founder of Midas Investments, told Cointelegraph that:
"I strongly believe that the current bear market is not the 'end' of the DeFi industry. For example, there is growing competition between decentralized exchanges on the staking platform. Optimism layer 2 Ethereum scale, as Velodrome reached over $130 million in TVL."
Optimism is an Ethereum scalability solution that uses Layer 2 to aggregate transaction verification off-chain, reducing processing and transaction cost for decentralized applications on the network.
TVL Optimism Network, USD millions. Source: Defi LlamaVenture capital inflows further support the resilience of the DeFi thesis. On July 12, the crypto-centric Multicoin Capital
Decentralized finance TVL down 66%, but growth in DEX aggregators, active addresses and steady fundraising show that the "DeFi winter" is not with us.
Market analysis
Aggregated Total Value Locked (TVL) in the crypto market measures the amount of funds deposited into smart contracts and this figure has risen from $160 billion in mid-April to today's $70 billion. the lowest level since March 2021. While this 66% contraction is concerning, there is plenty of data to suggest that the decentralized finance (DeFi) industry is resilient.
The problem with using TVL as a broad metric is the lack of detail that is not displayed. For example, the number of DeFi transactions, the growth of layer 2 scaling solutions, and venture capital inflows into the ecosystem are not reflected in the metric.
In DappRadar's July 29 Crypto Adoption Report, data shows that the number of DeFi 2Q transactions decreased by 15% from the previous quarter. This figure is much less of a concern than the devastating drop in TVL and is supported by a 12% drop in the number of unique active wallets over the same period.
Layer-2 is the path to sustainable DeFi growthIakov Levin, CEO and Founder of Midas Investments, told Cointelegraph that:
"I strongly believe that the current bear market is not the 'end' of the DeFi industry. For example, there is growing competition between decentralized exchanges on the staking platform. Optimism layer 2 Ethereum scale, as Velodrome reached over $130 million in TVL."
Optimism is an Ethereum scalability solution that uses Layer 2 to aggregate transaction verification off-chain, reducing processing and transaction cost for decentralized applications on the network.
TVL Optimism Network, USD millions. Source: Defi LlamaVenture capital inflows further support the resilience of the DeFi thesis. On July 12, the crypto-centric Multicoin Capital
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