DeFi sees recordbreaking 200 billion investments in cryptocurrencies over past two years
The DeFi sector has seen a surge in capital inflow, leading to price hikes in various cryptocurrencies as investors lock up their assets in different Web3 protocols. A report from DappRadar revealed that the total value locked (TVL) in DeFi applications reached $192 billion in May, the highest level since February 2022. Despite this growth in TVL, there was a 21% decrease in the number of unique active wallets (UAW) involved in DeFi, indicating a shrinking user base.
The increase in TVL was attributed to speculative trading driven by the anticipation of an Ethereum (ETH) exchange-traded fund (ETF). Cryptocurrencies locked in DeFi applications saw a 17% increase in value during May, mainly due to the rising prices of Ether and other tokens. Ethereum dominated the DeFi market with $130 billion, comprising 68% of the total TVL, followed by Solana (SOL) with $10.9 billion, representing 5.7% of the total.
Trading volumes on decentralized exchanges surged from $1.7 billion to $5.1 billion between August 2023 and June 7, 2024, leading to higher returns for liquidity providers and lenders, attracting more crypto deposits into DeFi platforms. Discussions about Bitcoin (BTC) and Ether ETFs were also prominent during this period.
While DeFi experienced a decline in UAW, other Web3 sectors saw growth. The gaming sector reported over 3 million active users, a 7.5% increase from the previous month. NFT marketplace users grew by 11%, reaching 1.52 million UAW, and Web3 social media apps saw a 29% rise to 1.92 million UAW. As of June 6, the total number of Web3 UAW reached 10.4 million.
NEAR Protocol (NEAR) continues to lead in blockchain performance, driven by popular Dapps like HOT Game and Kai-Ching. Polygon (MATIC) has a robust gaming ecosystem, while Arbitrum (ARB) emerged as the top performer with a 122% increase in UAW due to the social DApp UXLINK.
DeFi’s TVL has been on a steady upward trend since the beginning of the year, with Ethereum and Solana leading the way. Merlin has also made a mark as the largest Bitcoin sidechain. However, investors should exercise caution as DeFi remains experimental.
Disclaimer: The information provided should not be considered investment advice as investing is speculative and involves risk to your capital.
