DeFi TVL Up 34% in a Month Suggesting Crypto Winter Thawing

DeFi protocols saw significant inflows since reaching the yearly bottom last month.

DefiLlama looking cool next to a melting mouth holding a golden coin.
Created by Kornelija Poderskytė from DailyCoin
  • DeFi TVL surges over the past month.
  • Transaction fees have increased in line with a spike in network activity.
  • The total market cap is still far below the previous top

The Crypto winter has been a brutal affair as plunging market cap valuations have led to depressive sentiment. Amongst the mayhem, decentralized finance (DeFi) protocols were hit particularly hard as the total value locked (TVL) in DeFi recorded a peak-to-trough drawdown of 80% following the November 2021 top. However, the tide now seems to be turning for DeFi. 

DeFi protocols have received a strong influx of investor funds over the last month, leading to a 34% increase in TVL across all chains to a 24-week high, signaling renewed confidence in DeFi.

DeFi TVL Surges

The TVL across all chains grew by $10.5 billion since October 13 per DeFiLlama data, indicating renewed confidence in the DeFi sector. This increase equates to a 34% gain to $46.4 billion, a valuation not seen since June 7.

2023 has been a rollercoaster ride for DeFi, starting the year with a bang as TVL rose sharply to peak at $52.8 billion by mid-April. However, DeFi investors became increasingly twitchy as the year went on, culminating in outflows that bottomed at a year-to-date low of $35.9 billion on October 13.

2023 DeFi TVL all chains per DeFiLlama.
TVL across all chains in 2023 per DeFiLlama

Ethereum is the most prominent DeFi chain accounting for 55% of the TVL across all chains, followed by TRON which makes up 17.7% of the value locked in DeFi. Since October 13, Ethereum TVL has grown by 29% or $5.7 billion in absolute dollar value, indicating a resurgence of activity on the network.

Ethereum Fees Surge

Activity on the Ethereum network has surged since October 13, with daily transactions increasing 10.5% to 1.1 million transactions per day according to Bitinfocharts data

This spike in usage has predictably translated into higher gas fees for transactions, as users compete for block space capacity. The average transaction soared to $11.29 on November 13, equating to a 480% increase from October 13’s average cost of $1.95.

While crypto markets remain mired in bear territory, the recent spike in Ethereum gas fees highlights its ongoing scalability challenges. Furthermore, as network usage increases, as would occur in an eventual bull market, the network’s responsiveness and cost will become increasingly prohibitive for average users.

On the Flipside

  • Bitcoin transaction fees are also up as BRC-20 activity spiked, further suggesting a winter thawing is in action.
  • An average Ethereum fee reached $196.68 in May 2022.
  • The SEC is looking to redefine DeFi protocols as exchanges prompting concerns of “confusion” and “de facto banishment” from the DeFi Education Fund.

Why This Matters

The renewed influx of funds into DeFi protocols shows the sector’s resilience despite punishing market conditions. Although it appears that crypto winter is thawing, the market is still a long way from recapturing the previous $3 trillion market cap top.

Discover why the relevance of TVL as a meaningful metric is being questioned here:
Cardano Liquid Staking Challenges TVL Metric Relevance

Find out more about the community pushback against the SEC’s latest enforcement action against Kraken here: 
Kraken Co-Founder Slams SEC for Going “Back for Seconds”

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.

Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.