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According to a recent Coinbase report, interest in the network and its cryptocurrency has increased, particularly among institutions.
According to a new report, more money is being pumped into Ethereum than ever before, owing largely to big Wall Street players taking an interest in the cryptocurrency and DeFi.
In its half-yearly review, Coinbase, the largest exchange in the United States, stated that Ethereum outperformed all cryptocurrencies, including Bitcoin, in terms of growth and trading volume in the first six months of this year.
According to the report, total Ethereum exchange volume increased 1,461 percent in the first half of 2021 to $1.4 trillion (it was $92 billion in the same period in 2020). In comparison, Bitcoin trading volume increased by 489 percent, nearly doubling the total volume of ETH.
This year, the value of Ethereum has also skyrocketed. The report, authored by Brian Foster, stated that “the second most valuable crypto asset appreciated 895 percent over the 12-month period and 210 percent over the 6-month period ending June 30.”
So, what is driving Ethereum’s rise in 2021? It all boils down to one word, according to Coinbase: DeFi. According to the report, one of the main reasons was the “increased usage of DeFi protocols built on Ethereum, validating the network’s value as a global financial utility and platform for developers.”
DeFi, or decentralised finance, refers to projects that aim to revolutionise and replace traditional finance’s current methods of borrowing, lending, and banking. They’re extremely profitable, and the majority of them are built on Ethereum.
According to DeFi Pulse data, $61.2 billion is currently “locked-in” to the DeFi ecosystem. This refers to the amount of money being channelled through DeFi projects. Aave, a cryptocurrency lending protocol, is the most important project. Other massive projects include decentralised exchanges, which are similar to Coinbase but do not use an intermediary. Uniswap, for example, has $5.58 billion locked in and its 24-hour volume is around $295 million.
The DeFi world makes big promises but is extremely risky: billions can be made—but billions can also be lost. The world of DeFi is so unregulated that it is particularly vulnerable to hacks.
According to Coinbase, the surge in interest in Ethereum is due to institutional investors’ interest in DeFi. The exchange stated that its major clients planned to increase their investment in DeFi products in the first half of 2021.
“While DeFi was defined by retail investors for the majority of 2020, we saw a surge in DeFi interest among our institutional client base in H1 2021,” it said, noting that “traditional hedge funds” and “global investment banks” were particularly interested this year.