The total value locked in decentralised finance (DeFi) has grown by 75 percent to sit at $26.3 billion since January 1 when the value was at $15 billion. This is as the general market sentiment for cryptocurrencies continues to drop.
Researchers at Luno said the rise in DeFi value is driven by surging valuations of DeFi projects, with the combined DeFi market capitalisation reaching $45 billion, far above the peak of $21.5 billion set on 1 September. The decentralised exchanges have already set a monthly all-time-high in terms of trading volume as traders seek to gain exposure to the latest trends within DeFi.
To be sure, DeFi refers to a movement that aims to create an open-source, permissionless, and transparent financial service ecosystem that is available to everyone and operates without any central authority. The users would maintain full control over their assets and interact with this ecosystem through peer-to-peer (P2P), decentralised applications (dapps).
In other words, DeFi is the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralised architecture, outside of companies’ and governments’ control. One of its major inspirations is Tether’s supposed failure to address financial corruption. In 2019, Bitfinex was accused of using Tether, a dollar-backed cryptocurrency, to cover up to $850 million that went missing.
Bitcoin and Ethereum are the first original DeFi applications. This is because both coins are controlled by a large network of computers, not any central authority. While bitcoin is treated like gold, as a store-of-value investment that protects against inflation, Ethereum has been instrumental in helping startups crowdfund their operations.
The price of bitcoin has slipped down to the $30,000-$35,000 range for almost a week. It is a pullback that experts say was expected and necessary, given that nothing can move vertically forever.
“A cool-off like this is only healthy in a longer-term bull market,” said experts at Luno. After starting the week at $35,870, bitcoin began to decline on Wednesday 20 January, reaching a low of $29,100 early on Friday, 22 January before gradually rising and ending the week at $32,300. Overall, it lost 10 percent over the past week data from Chainalysis showed.
Ethereum meanwhile has been holding off for a bull run. The second-largest cryptocurrency pushed to new highs last week. It hit a new all-time high after testing $1400 last week and then dropping down to just over $1000.
