“DeFi: a market in decline” (Glassnode)

In recent years, there has been a great enthusiasm for DeFi or decentralized finance. A recent report by analytics firm Glassnode, however, shows that this market currently faces many challenges.

Downtrend confirmed!

The Glassnode report approves above all the crucial role of the Ethereum application layer in the development of the DeFi ecosystem. This layer has indeed boosted the emergence of new applications. It has also attracted significant capital and talent into the ecosystem.

In his reportGlassnode mostly highlights a downtrend of the DeFi sector. According to the data, we reached the peak of DeFi usage between June 2020 and 2021. This represents around 30% of the gas consumption on the Ethereum network. From this period, the market has seen a steady decline.

The decentralized finance market is characterized by its semi-regular bursts of activity. These often coincide with periods of high market volatility. According to the research result published by Glassnode, the supply-weighted price index for DeFi (valued in USD and ETH) keeps falling. We’re talking abouta drop of more than 90% compared to the two references since the beginning of 2021.

Liquidity and use of DeFi tokens

Another fact highlighted in the Glassnode report: only a small proportion of the overall token supply can be found on decentralized and centralized exchanges. The majority of tokens are used for undefined purposes.

Tokens are potentially owned by Founders, Team Members, and VCs. It is generally used as collateral in protocols (like EOS) or multi-signature wallets for derivatives.

Another interesting point mentioned in the report: we mainly use DeFi tokens in their own underlying protocol. This is particularly the case for SNX, BAL and CRV. This is often due to symbolic incentives and economic designs. They incentivize investors to lock in their tokens.

Glassnode’s report highlights the challenges facing DeFi. He points out an important fact: the future of DeFi will depend on DAOs and token holders who control these platforms.