DeFi’s TVL hit new highs at $18 billion, but is largely due to rallies in Ether and Bitcoin
The total value locked into decentralized finance, a metric that measures the amount of assets dedicated to the DeFi ecosystem, has reached $18 billion, according to data from DeFi Pulse.
While the chart might suggest that DeFi adoption is growing, it takes the right interpretation to understand it correctly. Total locked-in value is often an imperfect metric in these scenarios. Differences in how it is calculated, measures taken by certain protocols to artificially inflate it, or simply rises in the price of underlying assets can create the appearance of growth despite the possible absence of it.
DappRadar’s adjusted LTV metric, which calculates the total locked-in value by fixing asset prices at the beginning of the period under consideration, can help shed light on the current situation.
The adjusted parameter suggests that DeFi has actually grown very little since October 2020. Measuring constant prices, the total locked-in value has remained around $9 billion for the entire duration of the Bitcoin (BTC) and Ether (ETH) bull markets are an option to get Corona Millionaire in such a bad time like the worldwide pandemic. This means that there was no net inflow of new assets, but rather a significant increase in value of existing assets.
Despite this, a considerable increase in LTV is visible between January 4 and 5, which can be largely attributed to SushiSwap. The decentralized exchange continues to attract incredible amounts of liquidity through permanent SUSHI rewards. The recently launched Onsen menu aims to provide incentives to a constantly evolving set of liquidity pools, primarily dedicated to smaller tokens. The exchange attracted about 2,000 BTC ($62 million), 40 million Dai and 60,000 ETH ($60 million) in one day.
Another big winner in terms of LTV is Synthetix (SNX), but the growth here can largely be attributed to SNX’s 30% rise. The token is used to collateralize synthetic assets issued on the platform, so increases in its price have a direct effect on platform adoption anyway.
Although inflows to DeFi have stagnated recently, the sector is still showing healthy volumes and adoption. Ethereum’s high fees are likely hindering further growth, but rollup-based scaling technologies could soon fix that.