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DeFi tokens are seeing a spike in demand, even as compared to NFT marketplace tokens and top altcoins, as a result of the introduction of new DeFi ETFs. While gas fees were thought to be a barrier to institutional DeFi adoption, ETFs have expanded investment inflows, both retail and institutional. DeFi’s TVL has risen to $57.9 billion, a virtually vertical surge in the last 30 days.
The TVL dropped a few times in between, in the first week of April, however, post that, the growth was nearly vertical. Trade volume on DEXes denominated in USD is over 50 times what it was in 2020. Taking this into account, the global crypto market capitalization has increased over 10 times since then. The adjusted growth rate for DeFi is down from 10x between 2019 and 2020.
DeFi’s roaring rally is evident from more metrics like the stablecoin supply and the Ethereum network statistics. Without taking into account the token appreciation, the supply of stablecoins has increased over 10 times since 2020, of which 3 times can be accounted for YTD. The value of these tokens within the ecosystem may have largely flooded more DeFi tokens in the market, increased the liquidity, but the volatility has led to a consistent increase in price since the beginning of 2021.
Collateral and financing are both important components of DeFi’s recent price rally. Traders may argue that it has passed the “vertical” growth point, when WBTC, Bitcoin, and Ethereum are approaching all-time peaks. WBTC TVL is currently at $12.5 billion, indicating that DeFi is making a comeback. Furthermore, the top collateral is critical to DeFi’s rally. The TVL of DeFi’s top three lending protocols is $28 billion. It is important to remember, though, that only about one-third of the collateral is being used.
Another common use of the collateral is to have liquidity, which is critical in times of volatility and price increases. Because of the increased demand for collateral loans, the prices of some DeFi tokens have risen.
Furthermore, capital inflows into DeFi are increasing; however, consumer and network operation are suggestive of a market rally. After 2020, the number of unique addresses in DeFi has risen more than tenfold, and at this pace, DeFi’s network traffic is extremely high.