DeFi Altcoins Could Set a New Record: Analysts Point to This Date
The Decentralized Finance (DeFi) summer is reviving, and while the total value locked (TVL) in the crypto ecosystem is still well below its 2021 peak, it could reach record levels in the first half of next year.
According to a report published on Friday by Steno Research, this recent revival of DeFi is particularly linked to interest rates in the US.
According to the report, since the DeFi market is largely centered on the US dollar, interest rates are the most critical factor determining the appeal of DeFi. “Interest rates determine the tendency of investors to move towards higher-risk opportunities, which directly impacts DeFi markets,” analyst Mads Eberhardt wrote.
Steno noted that the first DeFi summer of 2020 came on the heels of the US Federal Reserve’s (Fed) rate cuts in response to the Covid pandemic. However, interest rates are not the only factor in DeFi’s comeback. Other crypto-specific factors are also at play. The growth in stablecoin supply, which has increased by around $40 billion since January, is significant as it forms the backbone of DeFi protocols.
“As interest rates fall, the opportunity cost of holding stablecoins decreases, making them more attractive, just as DeFi gains broader appeal in this type of environment,” Eberhardt added.
Current trends also play a role
The report also highlights the continued growth of real-world assets (RWA) such as tokenized stocks, bonds, and commodities as a key factor. The fact that these assets have increased by 50% since the beginning of the year suggests that demand for on-chain financial products like DeFi is strong.
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