DeFi is Booming Again As Active Loans & TVL Skyrocket in 2024

Decentralized finance (DeFi) is experiencing a significant resurgence, as key indicators such as active loans and total value locked (TVL) show remarkable growth from their 2023 lows. According to crypto market analytics platform Token Terminal, DeFi is making a strong comeback. As of July 31, active loans in DeFi have rebounded to early 2022 levels, reaching approximately $13.3 billion.

DeFi lending allows investors to lend their cryptocurrency to borrowers while earning interest, making lending and borrowing activity crucial for assessing DeFi participation and market health. Active loans peaked at $22.2 billion during the crypto bull run of 2021 when BTC and ETH hit highs of $69,000 and $4,800, respectively. However, these numbers fell significantly, dropping to $3.1 billion by January 2023.

Since last year’s low, DeFi lending has recovered substantially, suggesting a potential increase in leverage that could signal an upcoming bull market. Similarly, DeFi's TVL suffered a dramatic decline in 2023, plummeting 80% from its November 2021 peak of $180 billion to $37 billion by October 2023.

Yet, the sector has bounced back, with TVL surging approximately 160% to $96.5 billion, according to DeFiLlama. In the first half of 2024 alone, TVL doubled from $54 billion to a peak of $109 billion in June.

Discussing the overall growth, Kain Warwick, founder of the DeFi protocol Synthetix, stated to Cointelegraph that while the infrastructure has been ready, the user base is primarily enthusiasts. Synthetix has introduced an "on-chain gateway" named Infinex, dubbed the “UX Layer” of DeFi, to facilitate asset bridging across blockchains.

Taiki Maeda, founder of Humble Farmer Academy, noted on July 30 that the sector is entering a “DeFi renaissance” after years of underperformance. He highlighted Aave, a DeFi lending platform, as particularly promising due to the rising supply of its native stablecoin, GHO, and strategic moves by the Aave DAO to reduce costs and introduce new revenue streams.