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DeFi’s popularity is at a six-month peak, currently ranking third behind AI and Memes among all narratives. Notably, Decentralized finance (DeFi) is poised for a significant rebound, with total value locked (TVL) in the crypto space expected to reach an all-time high in the first half of next year, according to a recent report from Steno Research.
It seems a DeFi revival is on the horizon.
Key Drivers of DeFi’s Revival
Lower Interest Rates
Steno Research highlights that interest rates, particularly in the U.S., are crucial for DeFi’s appeal. Lower rates typically drive investors towards higher-risk opportunities in decentralized finance. The current climate mirrors the first DeFi summer in 2020, which followed Federal Reserve rate cuts during the Covid outbreak.
Rise of Stablecoins
The expansion of stablecoins, which have increased by about $40 billion since January, is a major boost for DeFi. Stablecoins are essential for DeFi protocols, and decreasing interest rates make holding them more attractive.
Real-World Assets
The routes of revival of DeFi will pass through Institutional DeFi, propelled by RWA tokenization in the same fashion ETFs created the bull market in Bitcoin this year. The growth of real-world assets (RWAs), such as tokenized stocks and bonds, has surged by 50% this year. This reflects strong demand for on-chain financial products and contributes to DeFi’s resurgence.
Due to institutional liquidity, RWA tokens will soon be utilized for trading, hedging, lending, and borrowing worldwide as more real-world assets are tokenized on public networks.
Lower Ethereum Fees
Reduced transaction fees on the Ethereum network, the primary blockchain for DeFi, further enhance the accessibility and appeal of decentralized finance. Many analysts believe, that historically, a major drop in Ethereum’s gas fees has often signaled a potential price bottom.
Top Defi Tokens to Keep an Eye
The top 3 DeFi crypto tokens that have the potential to outperform top altcoins during the upcoming bull run.
Stacks
Stacks (STX) is on a roll, up 9.44% in the past day and 12.53% over the week. It’s gearing up to test resistance at $1.675. Both MACD and RSI indicate strong bullish sentiment. If the trend persists, STX could aim for $2.135. However, a reversal might pull it back to $1.230.
AAVE
Over the past week, AAVE, a top 50 DeFi token has risen 25%, shattering an almost two-year accumulation range. Whales still buy AAVE, with on-chain data revealing more purchasing pressure than selling on decentralized exchanges. AAVE may rise to $170.
Maker
Maker is a popular decentralized exchange and stablecoin project. Maker (MKR) climbed 5% in 24 hours to $1.883 billion of market cap and ranked 46th. Key indicators like MACD are increasing bullishly with a 22.89% YTD gain. The bullish trend might push MKR to $2,630. It may fall to $1,700 otherwise.
Overall, with these factors in play, DeFi could reach new highs by mid-2024. Since its bottom in August, it has gone up 83%, and currently trading at $0.02355.
