The decentralized finance (DeFi) ecosystem was one of the hardest hit after the Terra (LUNA) ecosystem blew up. The collapse saw over $40 billion in value vaporized into thin air, kickstarting a tough period for the nascent industry.
Fast forward to the present, however, the DeFi industry has sparked into life again as investors’ risk appetite improves. According to data from industry tracker DeFilLama, the total value of assets locked in DeFi protocols has surpassed $100 billion. The current figure stands at around $103 billion, the highest that the space has recorded since May 2022.
Factors Driving Resurgence Revives DeFi
Undoubtedly, the resurging crypto market has been a primary contributor to the increase in the popular TVL metric. However, other potential factors driving DeFi usage may include the lack of market distrust for centralized options in the aftermath of the 2022 bear market.
Since the market collapse, DEXs such as Uniswap have seen a significant increase in trading volume and usage. At the same time, newer options, such as Solana’s Jupiter, have emerged as popular trading venues for investors with advanced Web3 experience.
Meanwhile, the increased adoption of stablecoins has been another factor contributing to DeFi’s growth. These stablecoins are often used to generate yield in the DeFi ecosystem and have proven a viable option for investors. The global stablecoin market cap has recently surpassed $150 billion, also representing its highest since the Terra collapse.
Lastly, the emergence of staking on Ethereum has contributed to the creation of additional value in the DeFi space. As Coinfomania recently reported, over $14 billion worth of assets are locked in liquid staking protocols, making them the second largest products in the DeFi space.
It remains to be seen whether the DeFi space will continue its resurgence in the coming months. But with the cryptocurrency space on the verge of breaching its previous all-time high market cap, optimism remains high among investors that a period of DeFi bloom is on the horizon.
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