Falling Cryptocurrencies and DeFi: Decentralized Finance Put to the Test of the Bear Market

DeFi dressed for crypto winter – The recent and violent fall of cryptocurrencies has taken with it all the decentralized finance. DeFi has borne the brunt of the drastic drop in the price of cryptos and the disinterest, even the anger of part of the public, for its protocols. But behind the raw numbers sometimes hides a more nuanced reality. This is revealed in a recent report by DappRadar which we are going to share with you.

DeFi numbers are down overall…

First of all, let’s look at the figures published in this document made public on July 29th. We learn there that TVL fell by 66% between April 2021 and now. As a reminder, the total value locked (TVL) represents the total value of assets deposited on all DeFi protocols and is expressed in dollars. So she went from 160 billion in spring 2021 to 70 billion currently. Of course, when the value of an asset decreases, mathematically the value of the TVL also decreases. And with the recent fall in cryptocurrency prices, TVL has correspondingly plunged.

But this number alone cannot describe the reality of the Challenge which ultimately hides a great disparity of protocols. Admittedly, some ecosystems, such as Terra Luna, are devastated, but others on the contrary are doing well. To have a more comprehensive view of the situation, it is therefore necessary to analyze other data. The report highlights, for example, the number of transactionsthe growth of solutions known as “second layer” as well as entries from capital in the ecosystem.

Let’s start with the number of transactions in DeFi observed by DappRadar. We can see that the decrease is limited to 15% between the first and second quarters of this year and that it can be related to the 12% decrease in the number of active portfolios. There is therefore a slight movement away from DeFi on certain platforms. But over the past 30 days, some still record a progress the number of users.

Ranking of DeFi apps based on their 30-day active addresses – Source: DappRadar

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…but nothing to worry about for crypto professionals

We can therefore conclude that the use of cache averages lots of differences between decentralized exchanges (DEX). For example, MetaMask and 1inch continue to rise, while Raydium tumbles. But a small discreet revolution also contradicts the pessimism of the figures.

Yakov LevinCEO and founder of Midas Investments, gives Coin Telegraph his feelings on the rise of second layer Where layer 2. Deployed to reduce the time and cost of operations on the main blockchains, they are blowing a new wind on the sector, and make Yakov Levin optimistic:

“Ultimately, I see the second layer as a potential factor in boosting the growth of the sector. By providing users with cheaper transaction fees and near instant confirmation, it will greatly improve the user experience and it will soon have the capacity to accommodate a new wave of users. »

Finally, the fundraising in DeFi are also a sign that the ecosystem is doing quite well. Let us quote MultiCoin Capital and its $430 million intended for “development of Web3 frameworks, DeFi applications and autonomous business models”. There is also Variant and its fund of 450 million dollars to develop “products that bridge the traditional financial system and DeFi”.

So yes, the global figures are rather negatives and confirm that we are well into this cryptocurrency winter so dreaded by observers. But the reality is, as often, more complex the numbers mean it. The sector is progressing in disorganized order and the better off continue to build the applications of tomorrow, ignoring the recent decline.

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