These key metrics are driving DeFi to 2022 highs

The decentralized finance (DeFi) sector is witnessing a resurgence, marked by growth in key metrics such as active loans and total value locked (TVL) from their 2023 lows.

DeFi lending, an important component that allows investors to lend their crypto holdings in exchange for interest, is an indicator of DeFi participation and the overall health of the market.

Active loans reach $13.3 billion as TVL rises 160%

In a recent post on X, crypto market analysis platform Token Terminal reported a notable increase in active lending within the DeFi sector, now reaching approximately $13.3 billion, levels last seen in early 2022. The publication added that increased lending activity suggests a potential increase in leverage within the sector, a trend often associated with the emergence of a bull market.

DeFi is reawakening ✍️ pic.twitter.com/xrkQqCxGHE

— Token Terminal (@tokenterminal) July 31, 2024

During the 2021 crypto bull market, active loans in DeFi soared to a high of $22.2 billion, mirroring the heights reached by Bitcoin and Ethereum, which approached $69,000 and $4,800, respectively. However, this number decreased to $10 billion in March 2022, and finally reached $3.1 billion in January 2023.

Total Value Locked (TVL) in DeFi also saw a decline last year, plummeting 80% from a November 2021 peak of $180 billion to roughly $37 billion in October 2023. However, according to DefiLlama, the sector has also seen a resurgence, with TVL increasing by around 160% to around $96.5 billion. In particular, DeFi TVL doubled in the first half of 2024, reaching a peak of $109 billion in June.

Currently, the leader in locked-in value is the liquid stake protocol Lido, with a TVL of $38.7 billion. Closely following the EigenLayer staking ecosystem and the Aave protocol, each with over $11 billion in locked assets.

Expert knowledge

Taiki Maeda, the founder of Humble Farmer Academy, has predicted that we could be entering a “Renaissance of DeFi” after more than four years of underperformance.

He noted that many “DeFi OGs” are now in the category of “high float, fully diluted valuation (FDV)” coins with strong catalysts on the horizon.

I believe we are approaching a DeFi renaissance period after 4+ years of extreme underperformance.

Many of these DeFi OGs are now in the “high float, low FDV” category of coins with strong catalysts on the way.

Here’s why I believe $AAVE @aave is ready to overcome it pic.twitter.com/gaTZpKOfdg

— Taiki Maeda (@TaikiMaeda2) July 29, 2024

Maeda cited DeFi lending platform Aave as an example, which he believes is “on the verge of breaking through” due to the growing supply of its native stablecoin GHO and the Aave DAO’s initiatives to lower costs and introduce new revenue streams.

Meanwhile, despite recent positive trends, CoinGecko data shows that DeFi assets have a market capitalization share of just 3.4%. Native tokens for prominent DeFi platforms such as Aave, Curve Finance (CRV), and Uniswap are also down more than 80% from their all-time highs.

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