DeFi Explodes in Q1 2024, Led by Ethereum Liquid Staking

Fueled by liquid staking advancements, the DeFi market experienced a massive surge in the first quarter of 2024.

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  • The DeFi market has boomed in the first quarter of 2024, with total value locked nearly doubling.
  • User activity has skyrocketed, raising hopes for continued DeFi expansion.
  • Despite a recent market correction, the strong performance of Q1 has painted a bright picture for DeFi’s future.

The first quarter of 2024 painted a bright picture for the decentralized finance (DeFi) market, with the total value locked (TVL) nearly doubling compared to the previous quarter. This surge, driven in part by advancements in Ethereum liquid staking, signifies a potential turning point for the industry.

Total Value Locked Surges 81% in 2024

Data from DeFi tracking platform DefiLlama reveals a significant rise in TVL, jumping from a low of $36 billion in Q4 2023 to a peak of nearly $97 billion in Q1. This translates to an impressive 81% increase since the year began, reaching a two-year high of $98 billion by last week.

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While some growth can be attributed to rising underlying asset prices, Messari, another crypto data provider, highlights the crucial role of liquid staking initiatives. 

Their report indicates a 65.6% quarter-on-quarter increase in DeFi collateral, reaching $101 billion. This uptick is primarily fueled by “asset price appreciation and liquid staking, led by Ethereum’s TVL growth of nearly 71%.”

This sentiment is echoed by a joint report from Web3 infrastructure provider QuickNode and institutional crypto data platform Artemis. They emphasize the significant impact of staking and liquid staking protocols on DeFi’s recent growth. 

Their findings suggest that staking now represents a substantial portion of DeFi’s TVL, further solidifying its importance in the ecosystem. Liquid staking emerged as a major driver, with its TVL skyrocketing to an all-time high of $63 billion in March. Lido, a prominent Ethereum liquid staking protocol, currently holds a dominant 62% market share within this sector. 

Is a Second DeFi Summer Coming?

Other players like EigenLayer witnessed a remarkable 990% surge in TVL during Q1, ending the period at $12 billion. EigenLayer’s unique feature allows users to stake their ETH multiple times, generating additional yields.

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QuickNode’s report further fuels optimism for the future, highlighting a substantial 291% increase in user activity compared to the previous quarter. This surge has ignited hopes of a “second DeFi Summer,” indicating potential for substantial growth despite regulatory hurdles posed by the Securities and Exchange Commission (SEC).

However, it’s important to note a recent correction in the broader crypto market. As of writing, DeFi TVL has dipped by 11%, currently sitting at $86.6 billion. While this represents a slight pullback, the first quarter’s performance signifies a positive trend within the DeFi space, with liquid staking innovations acting as a key catalyst.

On the Flipside

  • Users might face impermanent loss if the price of the underlying asset fluctuates significantly compared to the value of the liquid staking token they receive.
  • The SEC’s stance on staking remains unclear, potentially posing future challenges for DeFi and liquid staking protocols. 

Why This Matters

The massive surge in DeFi TVL, particularly fueled by advancements in liquid staking, suggests a maturing industry with innovative solutions attracting new users. This growth, despite a recent market correction, paints a promising picture for DeFi’s long-term sustainability and potential to even surpass its previous highs.

Are L2 chains and Solana the reason behind it? Read the article to find out more:
Ethereum Fees Drop to YTD Lows as L2 Chains and Solana Shine

Analysts are divided on whether Bitcoin and Ethereum can rebound after the massive crash. Is it a normal correction or will the price continue to decline? Read more to find out:
BTC and ETH Prices: Can They Rebound After Massive Crash?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.