Compared to the previous quarter, the total value (TVL) in decentralized finance (DeFi) has approximately doubled in the first quarter of 2024, indicating that DeFi has experienced tremendous growth compared to the previous quarter. It is possible to attribute this spike, at least in part, to Ethereum’s liquid asset withdrawal activities, which have been the driving force behind the rise in DeFi TVL prices. Protocols like Lido and EigenLayer have been essential in this growth, as they have contributed to the widespread adoption of liquid staking and redrawing.
Recent research shows that DeFi TVL has experienced a significant increase from a low of $36 billion in the fourth quarter of 2023 to a high of approximately $97 billion in the first quarter of 2024. This is an increase of 81% and marks a high point for DeFi TVL achieved in the last two years. There was a modest increase in the TVL data Messari provided, and he said the amount of DeFi collateral rose 65.6% from the previous quarter to $101 billion. A number of factors, including the increase in the value of underlying assets and the implementation of liquid redraws, have contributed to TVL’s expansion.
Both the asset price increase and liquidity reabsorption were the main factors contributing to Ethereum’s total asset value (TVL) increase, which was approximately 71% higher than before. Lido and EigenLayer are two examples of protocols that have played a major role in the revival of DeFi TVL since their inception. On March 13, TVL’s liquid stakes reached a record high of $63 billion. This result was largely due to the Ethereum liquid staking protocol Lido, which now commands a 62% market share of the liquid staking ecosystem. Additionally, the liquidity restoration protocol known as EigenLayer saw a significant increase in both its popularity and usage during the first three months of 2024. The total value of EigenLayer’s TVL reached $12 billion at the end of the quarter, a staggering 990% increase. EigenLayer makes it possible to stake Ethereum multiple times, resulting in higher returns.
In addition to cash withdrawal activities, user activities also played a major influence on the expansion of DeFi TVL. This growth was not only driven by cash withdrawal initiatives. In the most recent quarter, QuickNode recorded a significant increase in user activity of 29.1% compared to the previous quarter, fueling expectations of a second “DeFi Summer.” Despite the SEC’s attempts to regulate the decentralized finance space, there are indications that expansion and a paradigm shift are in the offing.
However, the current pullback in the cryptocurrency market has resulted in a decline in the value of DeFi TVL. As this article is being written, the value of DeFi TVL has fallen 11% to $86.6 billion. The entire value of assets captured in DeFi protocols has been negatively impacted due to the larger market decline, which has caused this drop.
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