C-C #91: The DeFi Bonanza

July 26, 2020
Mattison Asher


  1. DeFi total locked value and DEX volumes are rising parabolically
  2. The adoption of DeFi displays and the rise of DeFi token prices displays that fundamental value is being recognized by the market
  3. Almost all DeFi applications are built on Ethereum

DeFi? More like MoonFi!

DeFi Tokens Lead Crypto Returns in 2020 - DeFi Rate Research Report

The hot story in the past couple months has been around the surge of DeFi. Total locked value in DeFi, which measures the total value of digital assets in dollar terms that are held in DeFi smart contracts, has risen from approximately $650 million at the beginning of 2020 to $3.7 billion today.

Monthly DEX volumes have risen from about $250 million in the month of January to more than $2.5 billion thus far for the month of July. The growth in DEX’s is led by Uniswap, which on any given day commands 40 – 50% of total DEX volumes. Weekly aggregate DEX volume is now on par with Coinbase’s weekly volumes.

DeFi tokens have also been significantly outperforming the digital asset market. Many DeFi tokens have increased by 700 – 800% YTD, and almost any individual DeFi coin has significantly outperformed BTCs approximately 35% YTD return. COMP, KNC, MKR, LEND, KAVA, BAND, and YFI have all been strong YTD outperformers. Furthermore, the hottest token distributions have been led by DeFi projects such as yearn.finance and Compound.

DeFi is largely native to Ethereum

DeFi - What in the world is Decentralized Finance? Step-by-Step Guide

Of course, nearly all of this DeFi activity is happening on Ethereum. Many believe that DeFi might be Ethereum’s first “killer app”, and there are a lot of on-chain metrics to support this claim. Ethereum daily unique active addresses, which is similar to a unique daily active user metric, have risen from just under 200,000 in January to almost 600,000. Of course, while an increase in daily active addresses largely through demand for DeFi applications is significant for Ethereum adoption, it does lead to higher transaction fees, which are currently on average about 75 cents.

The market has woken up to the reality of DeFi adoption, and this realization is reflecting positively in the value of Ether. Ether, as of today, is up more than 100% YTD, significantly outperforming BTC.

Bullish for crypto

Ethereum Price Analysis - ETH Price Returns to 2020 Highs | CoinCodex

These positive developments on Ethereum are incredibly bullish for the overall crypto market. There is hot demand for innovative new tokens coming to market, just like there was in the 2017 market. Only this time, there is a much higher chance these token distributions are deemed compliant because they are not ICOs, with some projects choosing not to accept money for tokens in a primary market offering. The growth in DeFi displays that there is very real demand for products built on top of the blockchain.

Equally as exciting, crypto has not been moving in tandem with the S&P 500 lately, meaning its correlations could be further decoupling from the rest of the global market.

All of this activity is incredibly bullish not only from a sentiment perspective, but also because digital assets are starting to move based on fundamental adoption, which is an excellent sign the market is maturing beyond pure hype.