After the carnival, what is the status of DeF?
Original title: "Coin Metrics 丨 After the carnival, what is the status quo of DeFi?" "
Original source: Crypto Valley Live
Decentralized finance (DeFi) took over the crypto world over the summer. But after September, it waned in popularity and has since taken a backseat to BTC and ETH.
In this week’s topic, we discussed the rapid rise of DeFi Token, as well as the market value and usage status of DeFi.
This is the third rise in DeFi
Although it may seem like it popped up overnight, DeFi has been around for years. During 2018, early-stage projects like MakerDAO (MKR) and 0x (ZRX) pushed the total DeFi market capitalization to over $5 billion as Ethereum (ETH) prices reached all-time highs. But over the summer, DeFi’s initial rally was dwarfed by the rapid entry of many new projects.
Source: Coin Metrics Network Data Charts
The recent rise of DeFi began in June Launch of the COMP governance token of the Compound protocol. The launch of COMP kicked off the rise of decentralized lending and became the initial driving force behind DeFi’s skyrocketing growth. Compound lets users borrow cryptoassets like ETH, DAI, and USDC using cryptoassets as collateral. It also lets users lend out their crypto assets and earn yield, which has become a cornerstone of DeFi investing. Aside from Compound, the Aave protocol has grown into one of the largest DeFi decentralized lending platforms. Aave initially launched the LEND Token, which they recently transitioned to the AAVE Token.
After COMP, many other DeFi applications also launched governance tokens in the summer of 2020. Yearn.finance, an application that automatically invests users' funds in the highest-yielding decentralized lending market, launched the YFI governance token in mid-July. YFI was launched through an incentivized liquidity pool, which has become a popular way of DeFi Token. YFI reached a market cap of over $1 billion at the end of August.
The DeFi market capitalization peaked shortly after the launch of Uniswap’s UNI governance token on September 18. Uniswap, the largest Ethereum-based decentralized exchange, has been the engine behind the DeFi mania. Uniswap allows anyone to issue a new token and immediately start trading with a decentralized liquidity pool, which helps new DeFi tokens to launch quickly and scale. Trading volume on Uniswap increased from about $1 million per day in early June to nearly $1 billion per day in early September.
UNI was launched to reward previous Uniswap users and airdrops to liquidity providers. Due to the sudden launch, UNI almost pushed the market value of DeFi to a record high. But before long, the bubble started to burst. People who received the UNI airdrop started selling their tokens en masse, causing the price of UNI to drop from a high of nearly $7 to a low of less than $2. In addition, a series of bugs and hacks have resulted in huge losses, which has kept the market cap of the space down.
Source: Coin Metrics Network Data Charts
< p line="4hef">But the market value of DeFi has begun to recover. After hitting a low on Nov. 4, the DeFi market capitalization is back to where it was at the end of September following a surge in BTC and ETH. If BTC and ETH continue to rise, DeFi could be a big beneficiary.
Rebound in usage
Similar to market capitalization, DeFi usage, measured by daily active addresses, also peaked in September. After the initial airdrop, there were over 176,000 UNI active addresses on September 17th, the largest number in DeFi history to date. But since then, the daily active addresses of UNI have dropped rapidly and stabilized at around 5K per day.
Source: Coin Metrics Network Data Charts
Removing UNI from the above figure, we can see that other DeFi Tokens are recovering. Excluding UNI, the overall number of active addresses still peaked in early September, mainly due to the rise and fall of SushiSwap (SUSHI).
Source: Coin Metrics Network Data Charts
COMP usage has been growing since mid-October. On November 11, COMP active addresses reached 8,264, an all-time high.
Source: Coin Metrics Network Data Charts
< p line="Vr16">Since October, the activity of MakerDAO and MKR has also been increasing. MKR active addresses hit a record high of 2,281 on October 4, and broke through 2K again on November 10. MakerDAO recently reached an all-time high with Total Value Locked (TVL) exceeding $2.3 billion, breaking the $2 billion mark in early November. The decentralized stablecoin DAI issued by MakerDAO also ushered in a milestone last week, reaching 1 billion in supply for the first time.
Source: Coin Metrics Network Data Charts
< p line="nCdq">After falling for most of October, YFI active addresses are finally starting to rebound. On November 7th, YFI had 2,996 active addresses, the fourth-highest daily total since launch. On November 10, the active address of YFI also exceeded 2K.
Source: Coin Metrics Network Data Charts
Conclusion
After bottoming out in October, DeFi appears to be starting to recover. Usage trends show that COMP and MKR activity has been growing. Overall, as DeFi develops, it will continue to grow. As new funds flow into BTC and ETH, new DeFi tokens and applications may soon follow. If recent trends continue, another wave of DeFi could be coming soon.
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