DeFi's Total Value Locked Hits Record $192B in May amid User Count Decline
Summary:
In May, the total value locked in decentralized finance (DeFi) applications reached a record $192 billion, a surge primarily driven by an increase in Ether and token prices, as per a report by DappRadar. Despite this, the number of unique active wallets declined by 21%. Ethereum dominated the DeFi market, followed by Solana. The rise of DeFi's total locked value is speculated to be linked with anticipation around a potential Ethereum exchange-traded fund. However, the complexity of onboarding processes is seen as a possible obstacle to future growth in the sector.
In May, decentralized finance (DeFi) applications saw $192 billion locked in, the highest recorded since February 2022, as per a study by DappRadar, a blockchain analytics platform. Even with this upward trend in locked value, there was a noticeable 21% reduction in the unique active wallets in use in the DeFi sector. The worth of cryptocurrencies tied up in DeFi applications swelled by 17% in May, mainly driven by a surge in Ether (ETH) and token market values.
Ethereum led the pack in the DeFi market TVL, comprising $130 billion or 68% of the overall value. Solana (SOL) was a distant second, with a $10.9 billion share, contributing to 5.7% of the total. Nevertheless, Solana's DeFi TVL exhibited a 14% improvement from the prior month.
However, the DeFi industry witnessed a dip in daily unique active wallets (UAW), suggesting a contraction of users even as the remaining participants increased their deposits or saw their portfolio values go up. The UAW count dropped 21%, reaching 1.75 million for the month, representing 17% of the total UAW for all Web3 applications.
DappRadar considers the speculative tendency surrounding a potential Ethereum exchange-traded fund as the key driver behind this TVL rise. The platform observes, "the DeFi UAW fell, highlighting that majority of the trading was speculative, banking on ETH ETF." DeFi Llama reports an increase in the daily trade volumes of decentralized exchanges from $1.7 billion to $5.1 billion during October 1, 2023, and June 7, 2024. Such a rise could result in more attractive yields for liquidity providers and lenders, encouraging more crypto deposits in DeFi applications. During this time, conversation around Bitcoin (BTC) and Ethereum ETFs were quite intense.
While a reduction in UAW is noted in the DeFi sector, other facets of the Web3 market have reportedly gained momentum, with the gaming sector drawing over 3 million active users, a 7.5% upsurge from the previous month. NFT marketplace users witnessed a 11% rise, hitting 1.52 million UAW, and Web3 social media apps recorded a 29% increment, amounting to 1.92 million UAW.
The total Web3 UAW now sits at 10.4 million as per a report published on June 6. It is worth mentioning that an April report indicated that UAW had reached 7 million in Q1 2024, up from 4.3 million users in 2023. This trend signifies a steady rise in the user base for Web3 applications. Yet, some pundits express concerns about the complex onboarding process, suggesting it could impede future industry growth if the issue is not urgently addressed.
Published At
6/7/2024 8:49:00 PM
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