A slide in BTC prices, disappointing altcoin market and meme fatigue may bring a pivot into DeFi. Protocols and pools have been quietly refilling, after recovering from the fallout of FTX. A pivot to DeFi tokens may become the next hot narrative.
Ethereum-based DeFi may regain its position after Bitcoin did not manage to emerge as a platform for tokenization. The recovery of Ethereum (ETH) above $3,500 is lifting all protocols. Additionally, most pools and lending vaults have better liquidation protections. This sets up expectations of a pivot to DeFi as a source of quick recovery and future value from fees.
think we’re very close to a defi rotation people are burnt out from both high fdv and memecoins meanwhile you have a ton of fully vested projects out there with sustainable cashflowsdefi works and stands to grow 10-100x over next few years fueled by continued RWA adoption
— lito.eth (@litocoen) June 19, 2024
One of the most attractive features of DeFi is the source of app-based revenues. Some of the revenues are also shared with users. MakerDAO and Aave are among the top revenue producers in DeFi, and have survived the market turbulence. For crypto analysts, there is a growing list of DeFi projects that may be undervalued.
Read: SEC permanently ends all investigations into Ethereum
DeFi is no longer in its early growth stage, where any token could rise on a simple promise of future utility. In 2024, DeFi is widely popular and has become key infrastructure to all crypto users. Even outside the hype of Solana and Raydium token launches, the older generation of DeFi projects have become indispensable.
Wake up, new narrative just droppedOut with saturated memes and vapour, in with high revenue useful defi pic.twitter.com/QQxgfYO9IX
— Ice (@FroyoFren) June 17, 2024
Current projects aim to make existing DeFi more seamless and interoperable, through aggregation and optimized transactions. After the crash of Luna, DeFi investors are also more cautious and expect utility and potential earnings, not just a growing token value.
DeFi blue chips make advancements
DeFi bluechip tokens increased their volumes by more than 216%. Once again, Uniswap, Curve Finance, MakerDAO, and Aave recovered some lost ground. During the latest market downturn, a handful of DeFi protocols never stalled their trend and remained in the green. MakerDAO, LidoDAO, Curve Finance, and Injective retained some of their bull market earnings.
Also read: Which chains are most connected to Ethereum (ETH) based on token flows?
Those protocols have an outsized influence on the Ethereum DeFi ecosystem, especially LidoDAO, which controls up to 30% of staked ETH. RocketPool is also continuing its good performance, retaining the $27 level.
DeFi blue chips make up around 7.7% of transactions for all narrative tokens. But the DeFi narrative does not end with those tokens. The whole sector also includes GameFi, DEX, perpetual swaps, tokenization, and DEX aggregators. Some projects overlap or offer a mix of services.
With the current infrastructure, protocols are equipped to provide infrastructure no matter the direction of the whole market, while securing revenues from fees. The recently rising Base blockchain is also a source of DeFi traffic, with Base Swap DEX quickly gaining liquidity.
DeFi projects return to earnings in June
DeFi project earnings are showing positive results in June. MakerDAO returned to positive earnings so far this month, after a downturn in May. The protocol, which mixes DeFi with the creation of the DAI stablecoin, reached $2.5M in earnings as of June 19.
Aave earnings have not grown significantly, but retain levels similar to the previous month at $4.3M.
Curve (CRV) is a riskier project that has ended the last six months with losses, due to liquidations. For June, Curve shrank the loss to around $2.3M. Curve remains the most volatile protocol due to ETH liquidations. Yet the app is trying to grow its revenues, showing improvement in the past weeks.
Solid fees this week pic.twitter.com/3tCXLSEMCA
— Curve Finance (@CurveFinance) June 19, 2024
Lido Finance also achieved $3.08M for June, a 25% drop from May, but still a net positive. Some of the protocols, including Ethereum, are still suffering losses, but logging fees even during a bear market.
One of the big problems of the DeFi sector is Curve Finance, a protocol that has survived for years during the most turbulent and risky activity on the crypto market. The CRV market price is down to $0.33 and has not broken out yet during this bull cycle. Yet Curve has achieved $300M in revenues over its lifetime.
Some forms of DeFi remain inherently risky for liquidations, bad debt, and low liquidity. Despite this, several generations of DeFi tokens have achieved some longevity on the market and may return to the spotlight.
Cryptopolitan reporting by Hristina Vasileva