The Growing DeFi Landscape
The decentralized finance (DeFi) landscape has experienced consistent growth since late 2023, following a previous decline in May 2022. Over the past four months, the total value locked (TVL) in DeFi has surged by almost 100%. On February 17, the TVL reached a two-year high of $71.914 billion, nearly doubling from its low point of $36.122 billion on October 12, 2023.
Competitive DeFi Ecosystem and TVL Distribution
A significant factor contributing to this growth is the increased adoption and organic amount of funds locked in cryptocurrencies. Additionally, various layer-1 blockchains such as Solana, Cardano, and Avalanche have expanded their DeFi ecosystems. The introduction of new protocols, decentralized apps, tokens, and services has further fueled this growth.
Sharding blockchains like Radix, MultiversX, Near Protocol, and Sui Network have played a crucial role in promoting innovation and scalability within the DeFi space.
Ethereum briefly lost its leadership in decentralized exchange volume to Solana but regained its position with the highest 24-hour volume. Bitcoin dominates the monthly surge among the top 10 blockchains with a significant increase in total value locked.
The Total Value Locked in DeFi
The funds locked in DeFi now account for approximately 1% of Vanguard’s assets under management (AUM). Vanguard is the world’s second-largest asset manager with $7.25 trillion AUM.
Vanguard recently made headlines by refusing to offer approved Bitcoin ETFs to its customers. However, it is worth noting that Vanguard is also a major shareholder in Bitcoin mining companies.
Growth Potential for Decentralized Finance
Despite resistance from traditional financial institutions like Vanguard, cryptocurrencies and decentralized finance continue to gain momentum among different investment profiles. The DeFi sector shows promising growth potential for 2024 and beyond, challenging the dominance of traditional finance.
However, as warned by Charles Hoskinson, the “Legacy” financial system also seeks to gain more influence over the crypto market. Speculators play a significant role in driving capital flow within these systems.
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