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2021 has seen Ethereum go on a parabolic run, with the world’s largest altcoin climbing one ATH after the other over the past few months. While significant corrections over the past few days had pulled ETH’s value down to $2,615 at press time, its YTD returns were still as high as 260% on the charts.
We have already discussed the magnitude of Ethereum’s bullishness and the reasons that have led to the altcoin’s rally in the past. Among these considerations are rising institutional interest in Ethereum and excitement about impending network updates such as EIP-1559.
However, what is often overlooked in discussions about ETH’s success is the effect it has had on DeFi. The same was recently brought to light by how the space responded to the wider crypto-market corrections, especially when compared to the likes of Binance Smart Chain.
Before going there, however, it’s worth touching upon how much Ethereum, the platform that is the foundation of a majority of DeFi protocols in the space, has grown over the year.
Consider this – According to findings made by James Wang, Ethereum’s network revenue rose by 200x over a year, with the same climbing from $8 million in Q1 2020 to $1.7 billion in Q1 2021. In fact,
“In April, Ethereum generated annualized revenue run rate of $8.6 billion—comparable to AWS in 2015.”
Furthermore, gross transaction value increased from $33 billion to $713 billion over the same time span. Finally, the number of regular active addresses seemed to have increased from 364k to 607k.
Aside from the price of the altcoin, Ethereum’s success has also had an influence on DeFi. Total Value Locked, for example, increased from $0.8 billion in the first quarter of 2020 to $52 billion in the first quarter of 2021. Furthermore, DEX amount increased from $2.3 billion to $177 billion over the same time span.
Here, it’s worth noting that DeFi’s popularity reared its head once again, like it did last year, despite the fact that the issue of high gas prices arose once again.
However, there are other metrics that can be used to underline the scale of growth in the DeFi space. According to OKEx Insights, for instance, unique active wallets in the DeFi ecosystem have grown by more than 60% since mid-April.
The volume of ETH locked in smart contracts has risen too, with the same dwarfing the ETH held by centralized exchanges. The same was evidenced by a recent Glassnode finding, with the same revealing that until a few days ago, the former held almost 23% of Ethereum’s circulating supply while the latter held just 12% of the same.
What this implied is that since the start of the year, “ETH holders have been transferring their holdings from cryptocurrency exchanges to DeFi protocols,” with the same being the case when the most recent corrections set in as well.
The aforementioned corrections share quite a window into the persistence and performance of the ETH-led DeFi space. According to DeFi Llama, for instance, on the back of recent corrections, its TVL fell from a high of $115.9 billion to $82 billion at press time.
That is a big drop, but it pales in contrast to the declines experienced by the world’s largest altcoin during the same time frame, which totalled more than 40%.
A more direct comparison of Ethereum-led DeFi’s results over the last week will be with the so-called “Ethereum killer,” Binance Smart Chain. As Messari’s Mira Christanto recently pointed out, the drawdowns reported by ETH-built DeFi ventures were not as sharp as those registered by “BNB-DeFi names” following the first round of corrections this week.
In reality, the latter’s TVL had plummeted from $20.6 billion on May 10 to $7.92 billion on May 20.
— Mira Christanto (@asiahodl) May 17, 2021
What does this tell us? Well, it tells us that while Ethereum might have its own set of issues, its supposed “killers” still have a long way to go when it comes to aping the former’s market resilience.