- The TVL across all DeFi protocols hits $55.7 billion.
- Momentum in DeFi protocols has been trending higher since late Q4 2023.
- Changing DeFi market dynamics suggest users are shunning Ethereum.
In October 2023, DeFi markets hit a local bottom as the total value locked (TVL) fell below $37 billion. However, decentralized finance protocols began gaining momentum, with crypto sentiment improving towards the end of Q4 2023. This momentum has continued into the new year, with DeFi TVL reaching $55.7 billion on January 2, marking a 16-month high.
DeFi TVL Trends Higher
On January 2, the TVL in DeFi protocols hit $55.7 billion for the first time since September 2022, indicating a continuation of strength from the late Q4 2023 surge going into the new year.
Last year was characterized by indecision, with TVL trending higher from the start of 2023 to reach a local top of $52.8 billion by April 15, 2023. Since then, investors displayed caution, leading to outflows that dipped TVL to a yearly low of $35.9 billion by October 13, 2023.
However, a wider crypto market recovery attributable largely to spot Bitcoin ETF approval hype saw capital flowing into the DeFi market to print a marked uptrend to close 2023 on a high.
While DeFi TVL sees a continuation of inflows into the new year, there is a noticeable change in DeFi dominance.
The Decline of Ethereum DeFi?
Ethereum has been the dominant DeFi blockchain since the inception of decentralized finance in mid-2020. While that remains the case, with Ethereum currently holding 53.7% of the TVL across all chains, its market dominance was as high as 60% in the summer of 2023.
In the meantime, several other blockchains have been gaining traction, suggesting a change in DeFi market dynamics, including Cardano, which entered the top 10 DeFi protocols recently, and Solana, which spiked to fifth place as meme coin mania driven by Solana-based Bonk took markets by storm.
On the Flipside
- Growing TVL mirrors a broader rebound in crypto markets, with the total cap growing 115% over the past year to $1.73 trillion.
- Mainstream adoption of crypto and DeFi remains relatively low versus TradFi, indicating ample growth opportunities.
- The TVL in Ethereum has shown an enduring downtrend since 2022 when priced in ETH (rather than dollars).
Why This Matters
The resurgence in DeFi TVL demonstrates a growing appetite for crypto-enabled financial tools despite recent scandals and ongoing concerns over asset security. While the road to mainstream adoption remains long, the milestone recapture of $55 billion inspires confidence that the industry is on the right path.
Learn more about Ethereum DeFi exploits in 2023 here:
Ethereum Exploits Account for 70% of all DeFi Losses in 2023
Find out why the Bitcoin price is pumping here:
Bitcoin Spot ETF Early Nod Rumors Blast Price Past $45k