DeFi projects added to its TVL at an astonishing rate this year. The TVL stood at $691 Million in January 2020 and nearly a year later, the TVL surpassed $15 Billion on Monday. The YTD growth of DeFi is over 2000% with the top 6 DeFi projects including Maker, WBTC, Aave, Compound, etc. registering over $1 Billion in value locked.
Bitcoin’s famous March 12 price drop and the massive drop that followed the 2017 bull run have motivated investors to look beyond typical altcoins and take a closer look at DeFi Projects. Additionally, the rapidly increasing value locked in DeFi has added to the credibility of the projects and networks. This is significant for top protocols like Aave, Uniswap, and Sushiswap entering into 2021, as a lack of volatility in Bitcoin has vacated itself from the center stage when it comes to driving portfolio returns in the double digits. Despite repeated pullbacks, projects like Sushiswap and Yield Finance have shown resilience with regard to their price.
A key metric that suggests the drive from CeFi to DeFi is the percentage of Ethereum’s transaction fees spent on deposits and withdrawals. Based on data from Glassnode, nearly 99% of Ethereum’s transaction fees are spent on withdrawals from centralized exchanges. Centralized exchanges have also launched projects in collaboration with DeFi, and that signals a shift in trader interest and sentiment towards DeFi. Added to this, top exchanges like Binance and OKEx have made a few of the biggest investments in DeFi.
Apart from the rapidly increasing TVL, there are few compelling reasons for DeFi projects to add extra joy to the portfolios of retail traders. During mid-August 2020, top DeFi projects were competing with each other with incentives and rewards, however, with an increase in hacks related to DeFi projects, the focus shifted to Ethereum’s rally. However, since the launch of ETH 2.0, the focus may have shifted back to DeFi.
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