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The Rise of Ethereum in Decentralized Finance (DeFi)
The Ethereum network has experienced significant growth in the past four months, with increasing decentralized activity and institutional inflows.
Increasing Transactions and Value Locked
Data from DefiLlama indicates a surge in the number of transactions within decentralized finance (DeFi) protocols, leading to a rise in the total value locked (TVL) on the Ethereum network, which currently stands at $51.3 billion. Top protocols such as Lido, Maker, and EigenLayer have recorded significant inflows, with respective TVL figures of $32 billion, $9.1 billion, and $9 billion.
Ethereum’s Dominance in DeFi TVL
As of now, Ethereum holds a dominant 60.03% share of the market, followed by Tron and Binance Smart Chain with 11.6% and 5.5% respectively. While Ethereum experienced a 6% growth in the last seven days, Bitcoin saw a substantial 30% increase during the same period, indicating a broader market trend contributing to the growth of the DeFi landscape.
Recovery from Bear Market
The surge in DeFi activities can be traced back to Q4 2023, following significant inflows that pulled the market out of a bear cycle. The 2022 bear market, driven by macroeconomic factors and industry instabilities, resulted in plummeting asset prices and reduced DeFi volumes. Market leaders Bitcoin and Ethereum suffered a 55% loss in volumes, with the entire ecosystem facing challenges.
However, the market dynamics changed with BlackRock’s spot Bitcoin ETF application and renewed institutional demand, propelling BTC’s price above $40,000 in December. The anticipation for a spot BTC ETF approval by the United States Securities and Exchange Commission (SEC) led to increased inflows into institutional products, pushing assets under management (AUM) beyond $67 billion.
Institutional Interest in Ethereum
With growing institutional funds, investors are seeking interest-earning opportunities across various networks. Ethereum, as the largest smart contract blockchain, has benefitted from the recent market upturn. Institutional attention on Ethereum has intensified, particularly in anticipation of a potential spot ETF approval.
Bitcoin ETFs have already attracted over $5.2 billion in inflows, with expectations for further growth. This has spurred new investments in ETH, with major firms considering Ethereum as the next crypto ETF in the market. Wealth managers have also recognized Ethereum’s growth potential, particularly due to its staking feature and undervalued narrative.
A recent market report from Coinbase further underscores the rising institutional interest in Ethereum, driven by the possibility of ETF approval in the United States.