Report: trading volumes suggest that DeFi is not over

According to a recent report, trading volumes suggest that DeFi is far from over, and could see renewed growth in the coming months.

The report was compiled by OKEx Insights with data provided by Kaiko, and examined the cycle of expansion and contraction of DeFi during 2020. 

This analysis of trading data showed that newly created DeFi and yield-farming tokens have experienced a classic cycle of expansion and contraction common among new asset classes. 

Perception by market participants has gradually shifted from irrational to rational, with the best DeFi tokens hitting bottom in November and then starting to rise again in the last week of the month. 

Now the total market capitalization of DeFi tokens has risen again to around $19 billion, still below the highs but very close to the level at the beginning of September, while the total value locked (TVL) in DeFi protocols has just reached an all-time high of over $14 billion. 

There was a boom in the summer, thanks mainly to yield farming, followed by a rapid decline in early autumn and a calmer recovery in the last month. The report suggests that the full cycle of training and bubble bursting is behind us, so much so that DeFi could experience renewed growth and activity in the coming months.

The cause of the bursting of the DeFi mini-bubble was identified in the disappearance of high yield farming yields in September, at the time of the sharp and sudden drop in price from $11,500 to $10,000, with consequent heavy losses also for the prices of DeFi tokens in the following month. 

The trend was then inverted again in November thanks to the soaring price of bitcoin and to the circulation of the news of the launch of phase zero of Ethereum 2.0, pouring again some optimism also in the DeFi sector.

The volumes analyzed are those of Balancer (BAL), Compound (COMP), Curve (CRV), Kyber Network (KNC), Chainlink (LINK), SUN, SushiSwap (SUSHI), Uniswap (UNI), yearn.finance (YFI) and DFI.money (YFII), on 10 exchanges. 

These data clearly show that users’ attitude towards trading these tokens has been enthusiastic over the months, particularly in September, when UNI’s airdrop generated a Fear Of Missing Out (FOMO). 

However, since September 26th the trading volume of DeFi tokens has decreased dramatically, and in the second half, it fell precipitously due to the persistent drop in their prices which led many investors to move away from these tokens.