When compared to the previous quarter, the total value locked (TVL) in decentralized finance (DeFi) almost doubled during the first quarter of 2024, indicating that DeFi has seen tremendous growth compared to the previous quarter. At least partially, this increase can be attributed to Ethereum’s liquid reallocation activities, which has been the driving force behind the expansion of DeFi TVL prices. Protocols like Lido and Eigenlayers have been essential to this growth, as they have contributed to the widespread adoption of liquid staking and restacking.
Recent studies indicate that DeFi TVL experienced a significant increase from a low of $36 billion in Q4 2023 to a high of nearly $97 billion in Q1 2024. This is an increase of 81% and a high point for DeFi. TVL has reached in the last two years. TVL data provided by Messari showed a slight increase, and they said the amount of DeFi collateral increased by 65.6% from the previous quarter, reaching $101 billion. Several factors have contributed to the expansion of TVL, including increases in the values of underlying assets and the implementation of liquid repositioning.
Both asset price appreciation and liquid redeployment were the primary factors that contributed to the increase in the total value of assets (TVL) of Ethereum, which was approximately 71% higher than before. Lido and Eigenlayers are two examples of protocols that have played a significant role in the revival of DeFi TVL since their inception. On March 13, liquid staking TVL hit an all-time high of $63 billion. This result was mostly driven by Ethereum liquid staking protocol Lido, which now controls 62% market share of the liquid staking ecosystem. Additionally, during the first three months of 2024, the liquidity restoration protocol known as EigenLayer saw a significant increase in both the popularity and its usage. Eigenlayer’s total TVL value reached $12 billion at the end of the quarter, representing a staggering 990% growth. EigenLayer makes it possible to stake Ethereum multiple times, resulting in increased returns.
Apart from liquid recovery activities, user activity also played a big impact in the expansion of DeFi TVL. The liquidity restoration initiative was not the only contributor to this increase. In the most recent quarter, Quicknode reported a significant increase in user activity of 29.1% compared to the previous quarter, which has fueled expectations of a second “DeFi Summer”. Despite the SEC’s efforts to regulate the decentralized finance sector, there are signs that expansion and a paradigm shift are on the horizon.
However, the current downturn in the cryptocurrency market has resulted in a decrease in the value of DeFi TVL. As this article is being written, DeFi TVL value has fallen 11% to $86.6 billion. The entire value of assets locked in DeFi protocols has been negatively impacted as a result of the large market downturn that has led to this decline.
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