Bullish development: DeFi markets experience unprecedented growth in 2021
Amid the crypto bull run in 2021, decentralised financial markets (DeFi) have more than doubled in terms of total completed value (TVL) so far this year.
DeFi markets are showing growth of 143% so far in 2021, representing $37.69 billion in value from the combination of Bitcoin Evolution lending protocols, decentralised exchanges, derivatives, payments and asset protocols.
Growth dominated by lending protocols and DEXs
Among these various sectors, lending protocol MakerDAO has achieved a market dominance of 16.47%, according to DeFi Pulse data. MakerDAO currently tops the rankings with a total closed value of $6.21 billion.
The other two most prominent lending protocols, Aave and Compound, have locked in nearly $10 billion in value combined. Lending protocols have 133% more value locked compared to their 1/1/2021 values.
Decentralised Exchanges (DEX) are the second most common type of DeFi platform after the aforementioned Lending protocols.
As highlighted by Bloqport Insights in a tweet, DEXs have seen volumes of more than $120bn so far in 2021. This is higher than the volumes processed by these exchanges in all years prior to 2021 combined.
Monthly DEX growth chart from Dune Analytics.
At the current rate, DEX volumes will reach $67bn by the end of the month. This would surpass the previous monthly all-time high of $63bn in January 2021.
The dominant DEX is Curve Finance, which holds over 30% of the total value of all DEXs. Uniswap and SushiSwap, whose competitive saga made big headlines last September, are both honourable mentions.
DeFi is linked to flagship cryptocurrency stocks
DeFi is primarily linked to Ethereum (Go to Buy Ethereum with Paypal guide) as an asset, as much of its protocols and dApps are built on the Ethereum blockchain. However, the market also seems to react to price changes in Bitcoin.
This influence was evident in the recent price event in the cryptocurrency markets on 22 February, often referred to as “Bloody Monday”. Along with Bitcoin and almost every other altcoin, the DeFi market also experienced a drop in value.
The total value fell from an all-time high of almost $43 billion on 22 February to $36.16 billion on 24 February.
Although DeFi growth in 2021 appears to be extremely rapid, there is evidence to suggest that this growth may be sustainable. Institutional asset manager Greyscale Investments has also listed DeFi-related assets such as Aave, Cosmos and Polkadot to add to its portfolio.
Even privacy-focused browser Brave announced the launch of its browser-integrated DeFi wallet with access to a DEX where users can trade their assets.