Traders are anticipating a “DeFi Summer 2.0” as TVL and token prices rise.

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A rally in blue-chip DeFi tokens, as well as the sector’s rising total value, has traders optimistic about a prolonged rally.

Decentralized finance (DeFi) was one of the main factors that drove the crypto market higher throughout 2021, and platforms such as Uniswap (UNI), SushiSwap (SUSHI), and Aave (AAVE) continue to form the sector’s bedrock.

Similar to altcoins, DeFi tokens took a severe beating as Bitcoin price corrected from its $65,800 all-time high, and data from  TradingView shows that since DeFi index perpetual futures contract hit a low of $5,340 on July 20. Since then, the value of the index has rallied by 45% to $7,682 and this has analysts watching to see if a reversal is in order.

DeFi index perpetual futures contract 1-day chart. Source: TradingView

Total value locked reverses course

In DeFi, the total value locked (TVL) is a platform or the sector as a whole is used to determine the strength and weakness across all platforms.

Total value locked in DeFi. Source: DeFi Llama

While this metric remains roughly 30% lower than its all-time high of $154.91 billion, it has increased from $3 billion in July 2020 to $111.04 billion by July 2021.

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Out of the top 20 DeFi platforms, the Flexa (AMP) protocol had the highest percentage increase in TVL over the last seven days, with a 68 percent increase, and Lido had a 38 percent increase (LDO).

DeFi tokens rally as user activity surges

Further evidence of the ongoing rebound in the DeFi sector can be found in the rising token values of some of the up-and-coming protocols.

XVS, LUNA, RSR, AMP and KAVA (USDT pairs). 4-hour chart. Source: TradingView

LUNA and AMP were the two biggest price gainers over the last seven days among the top 20 DeFi protocols, with increases of 83 percent and 64 percent, respectively.

While daily trading volume on decentralised exchanges has remained relatively flat below $2 billion for the past month, the price of Uniswap increased by 17.8 percent and SushiSwap increased by 21.5 percent between July 21 and July 27, and user activity appears to be on the rise.

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Daily DEX volume. Source: Dune Analytics

Continued increases in the number of new users interacting with DeFi protocols is another sign of the growing strength of the sector, with a record 2.091 million unique addresses interacting with a DeFi protocol as of July 27.

Total DeFi users over time. Source: Dune Analytics

Altogether, these developments have caught the attention analysts and investors who are hoping for a ‘DeFi Summer 2.0’.

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