Checked my portfolio this morning and Ethereum jumped in value. According to Coinbase, this is because the universe of crypto-based lending, saving, and trading apps known as Decentralised Finance or DeFi has been growing tremendously.
I'm trying to figure out the growth. Coinbase speculates that traders have been at work on various DeFi platforms reaching $165 billion in trades. The latest surge has been fueled by the following:
- Institutional investors attracted by high yields are increasingly interested in DeFi — including payment company Square and Wall Street giants like J.P. Morgan and BlackRock. According to the Chainalysis Global DeFi Adoption Index, the share of DeFi transaction volume conducted by large institutional traders rose from less than 10% in mid-2020 to over 60% in the second quarter of this year.
- MetaMask, a popular wallet option for DeFi, has seen its user count soar 1,800% this year. It now has more than 10 million users, up from around 600,000 last summer (and 5 million in April).
- A consortium of the largest DeFi apps have banded together to bring DeFi to “the 6 billon smartphone users around the world.” Using a crypto platform called Celo, the group (which includes Aave, Curve, and SushiSwap) aims to increase crypto adoption in developing economies.
- Decentralized lending platform Aave is the largest DeFi application, with $14.2 billion TVL. Aave is set to launch a dedicated lending platform for institutions “within weeks.” In other Aave news, Bitwise, the world’s largest crypto-index-fund manager (with over $1 billion invested) recently announced the creation of the Bitwise Aave Fund.
If you trade popular tokens associated with DeFi such as Ethereum (ETH) or Cardano you will notice that ETH now regularly sees greater trade volumes than BTC and by market cap Cardano is now the third-biggest cryptocurrency. Even if you aren’t directly experimenting with DeFi, it’s useful to know what’s happening in that world.