Data from DeFi Llama has revealed that the industry has recovered 15.30% so far in the third quarter, from $54.66 billion it was on July 1st to stand at $63.02 billion as at the 23rd of August 2022. It’s no news that the Decentralized Finance (DeFi) space has been having it rough as Nairametrics reported that data provided by DeFi Llama revealed that the DeFi ecosystem lost 68.13% representing $155.79 billion in Total Value Locked (TVL) in the second quarter of 2022.
The rally can obviously be traced to the cryptocurrency market’s slow but steady recovery, which is led by Ether, the native token of the Ethereum blockchain. The Ethereum blockchain accounts for $35.44 billion or 56.24% of the TVL seen in the cryptocurrency space today.
Since the first of July, Ether has gained 56.65%, from $1,059.77 to stand at $1,660.10 as of the time of this writing. At peak prices in the third quarter, Ether has gained as much as 91%, as it traded a quarter of $2,022.79 on the 14th of August 2022 on news on the blockchain’s upcoming “Merge.”
The TVL is a measure of performance in the DeFi space. It measures the total value of cryptocurrencies that users “lock up” in various lending and staking protocols. It measures the commitment of cryptocurrencies locked up in a smart contract for any project, in a liquidity pool for lending or staked in a blockchain node for mining crypto that uses a proof-of-stake (PoS) consensus method. TVL is widely used to measure the health of a cryptocurrency.
What you should know
- In July, Ethereum continued to have the highest amount of value frozen. On the first of July, Ethereum TVL was roughly $31.58 billion and increased to $37.41 billion at the end of the month, an 18.46% increase. The Ethereum blockchain’s TVL peaked at $39.82 billion on the 14th of August 2022.
- After Terra’s failure, TRON now holds the title of the second largest DeFi ecosystem today as its TVL began the month of July with $3.95 billion, but on July 31, it had increased to $5.91 billion, a near 50% rally to dethrone BNB Chain as the largest chain.
- BNB Chain is now the chain with the third-highest amount of value locked. BNB Chain’s TVL had a value of almost $4.97 billion on July 1 and reached approximately $5.66 billion at the end of the month, a 13.88% gain. Avalanche experienced an increase as well, growing from $2.68 billion to $2.81 billion.
- A notable outlier is the Polygon network which has seen its TVL grow by 119% in the third quarter of 2022, ranking as the fourth largest chain in the DeFi ecosystem, outpacing Avalanche and Solana. Its TVL grew from $1.46 billion at the start of the quarter to stand at $3.20 billion.
- Besides its DeFi growth, there have been significant updates to the Polygon network this month. Numerous projects from the Terra ecosystem have moved to the Polygon network. This was primarily due to the Terra Development Fund, a multi-million-dollar program that assisted these projects with their relocation.
- Polygon was also chosen to participate in the Disney Accelerator Program, which strives to promote the expansion of creative businesses. Artificial intelligence (AI), non-fungible tokens (NFTs), and augmented reality (AR) technologies are heavily emphasized in this year’s Disney Accelerator class.
- Additionally, Polygon has plans to launch a new web3 phone alongside tech startup Nothing, a London-based company that wants to “remove the barriers between people and technology.” Their goal with their new web3 smartphone is to enable NFT drops straight to their Android-based phone.
Although we are seeing a steady growth in the DeFi ecosystem, one may think that investor confidence is slowly returning back to the market, however, this is not the case.
Glassnode’s latest report stated, “The recent price uptrend has failed to attract a significant wave of new active users, which is particularly noticeable amongst retail investors and speculators. The monthly momentum of exchange flows is also not suggesting a new wave of investors entering the market, implying a relatively lackluster influx of capital. The current market structure is certainly comparable with the late-2018 bear market, however, does not yet have the macro trend reversal in profitability and demand inflow required for a sustainable uptrend.”
