2/14 Ethereum DeFi Analysis
Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.
In this report I will analyze the Ethereum decentralized finance (DeFi) space based on a number of factors.
The total value locked (TVL) figure in the DeFi space is currently about $84 billion according to data analytics platform DeFi Pulse.
The DeFi TVL figure has grown considerably since the inception of DeFi analytics tracking around 2017, especially in late 2020 and into 2021 where the amount of capital invested in the space has exploded from about $10B in January 2020 to an all time high of $112B in November 2021. The chart below focuses on the DeFi TVL in the past year which puts the current figures in context of the overall DeFi growth and decline correlating with the greater cryptocurrency market.
While the TVL figure has fallen about -42% from its highs in November 2021 to recent lows of $65B established in Janaury 2022, late January into February has produced a reversal to the upside in terms of capital invested in overall DeFi projects for the time being. This is also seen in correlation with the total cryptocurrency market capitalization, which is a measurement of the total amount invested in cryptocurrencies at a given time.
It is important to note that while the DeFi TVL has fallen to recent lows of $65B, it is still considerably higher than where it was in February 2021 ($46B), and even during the cryptocurrency market crash in May/June 2021 (lows of $58B).
A crucial figure to track alongside the TVL is the total DeFi users over time, where users tracked will consist of a measurement of unique addresses participating in DeFi protocols on the Ethereum blockchain. According to analytics platform Dune Analytics, the total unique addresses participating in DeFi is currently about 4.4 million. It must be stated that “users” can have multiple addresses, so the figures shown below may be considered as overestimates.
The information shown above indicates that the total amount of ETH addresses participating in the DeFi space continues to grow despite DeFi TVL and cryptocurrency market capitalization losses in Q4 2021 and Q1 2022. A further inspection reveals that the majority of addresses are actively using OpenSea and the Uniswap decentralized exchange (DEX), suggesting that most users are participating in non-fungible token trading and/or cryptocurrency trading on a DEX.
