Investors pour nearly 200 billion into DeFi reaching a 2year high
The realm of Decentralized Finance (DeFi) has recently attracted a substantial influx of investment, resulting in a surge in the value of various cryptocurrencies as investors lock up assets in different Web3 protocols. According to a recent analysis by blockchain analytics firm DappRadar, the total value locked (TVL) in DeFi applications skyrocketed to $192 billion in May, reaching the highest level since February 2022.
Despite the significant increase in TVL, there was a 21% decrease in the number of unique active wallets (UAW) participating in DeFi, indicating a shrinking user base. DappRadar attributed the growth in TVL to speculative trading, fueled by the anticipation of a potential Ethereum (ETH) exchange-traded fund (ETF).
Cryptocurrencies locked within DeFi platforms saw a 17% increase in value during May, mainly driven by the rising prices of Ether and other tokens. Ethereum remained dominant in the DeFi market, holding $130 billion or 68% of the total TVL. Solana (SOL) followed with $10.9 billion, representing 5.7% of the total TVL and reflecting a 14% increase from the previous month.
Data from DefiLlama revealed a significant surge in 24-hour trading volumes on decentralized exchanges, jumping from $1.7 billion to $5.1 billion between August 2023 and June 7, 2024. This surge likely led to higher returns for liquidity providers and lenders, encouraging more crypto deposits into DeFi platforms. Additionally, discussions around Bitcoin (BTC) and Ether ETFs gained traction during this period.
While the DeFi sector saw a decline in UAW, other Web3 sectors experienced growth. The gaming sector saw over 3 million active users, a 7.5% increase from the previous month. NFT marketplace users grew by 11%, reaching 1.52 million UAW, and Web3 social media apps witnessed a 29% rise to 1.92 million UAW. As of June 6, the total number of Web3 UAW reached 10.4 million.
In terms of blockchain network performance, NEAR Protocol (NEAR) continued to lead with popular DApps like HOT Game and Kai-Ching. Polygon (MATIC) followed with its robust gaming ecosystem, while Arbitrum (ARB) emerged as the top performer this month, experiencing a 122% increase in UAW due to the social DApp UXLINK.
The TVL in DeFi has shown a consistent upward trend since the beginning of the year. Ethereum remains the dominant player in DeFi, with Solana benefiting from increased memecoin trading and DeFi activity. Merlin has also gained attention, emerging as the largest Bitcoin sidechain. However, investors should be cautious due to the experimental nature of DeFi.
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