DeFi TVL stagnates below $50 billion despite rising bitcoin prices.

DeFi TVL has increased by about $6 billion since it was registered on December 31, 2022, reaching $46.86 billion as of January 23. This may indicate that some unsure players are still trying to find their footing after the crypto freeze of 2022.

The DeFi scene’s performance stands in stark contrast to the performance of the biggest crypto assets, such as bitcoin (BTC). BTC prices have increased by about 20% over the past 10 trading days and by almost 40% from their December 2022 lows.

BTC has surged higher recently, reaching a multi-month high of nearly $23,000, as a result of the expansion across the crypto ecosystem, which is primarily driven by softening inflation and hardening labour markets in the United States. BTC has calmed off at the time of writing but is still in a bullish shape, especially because it is rising above the highs from November 2022 and recovering losses brought on by the FTX crash.

It was widely anticipated that DeFi TVL would grow in step with the rise in cryptocurrency values. Data, however, reveals an abnormality in DeFi TVL’s lagged good price action.

However, fundamental experts can read this as a signal to increase their positions in the most popular DeFi coins because they might be undervalued. Although there is a direct relationship between DeFi TVL and cryptocurrency values, this preview should still be used with caution.

Hackers targeted DeFi protocols in 2022, causing multi-billion dollar damages. One of the largest crypto historical heists, for instance, included the Binance cross-chain Bridge and involved the theft of 2 million BNB. Regulators are also keeping an eye on the DeFi protocols and tokens, which might deter some nations from participating.

The charts demonstrate that the commencement of TVL’s increase coincided with the rise in crypto prices that began in late 2020. The cryptocurrency market cap increased from $400 billion in Q4 2020 to $2.8 trillion in Q4 2021. DeFi TVL rose from $9.5 billion to $181 billion throughout this time.

What does this indicate?

At spot rates, DeFi TVL is less than half of what it was at the beginning of December 2021, when it reached over $181b thanks to a strong performance across the board for tokens. When they were at their highest, mainnet tokens like ethereum (ETH), solana (SOL), BNB Smart Chain (BNB), and others rose to record highs, boosting TVL even in developing DeFi platforms and layer-2 networks.

Although the price of cryptocurrencies is currently rising, DeFi activity seemed muted. This new development raises concerns about user behaviour, attitude, and interest in yield farming, trading, and other DeFi activities.


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