DeFi Market Commentary | April 2022
March gains in DeFi and more broadly the crypto market were short-lived as most of it was given back in April. Since last November, the downward trend in performance continued for the risky assets as the market continued to encounter macro-headwinds including high inflation and rising real yields.
Year-to-date performance for DeFi underperform crypto-beta (represented by ETH and BTC) and is down 47% while ETH and BTC performed better at -24% and -18%, respectively. Ethereum underperformed Bitcoin possibly due to the recent news that the transition to proof-of-stake will be delayed until later this year. Meanwhile, Bitcoin has been demonstrating less volatility relative to other sectors in the crypto market.
As of April, the DeFi market cap (top 100 DeFi coins by Market Capitalization) also slumped back down this year from its March highs [of approximately $150 billion] to $106 billion.
The average 20 day growth rate for DeFi wallets has significantly slowed down and sits at around 1% as of April month-end. In comparison, the growth rate was around 4% last November when Ethereum’s price reached a peak of around ~$4,700. Cumulatively, the total number of DeFi wallets sits at around 4.7 million today. Although users may have multiple wallets or addresses, this data point serves as a worthy pulse on the overall health of the DeFi ecosystem.
The total value locked (TVL) in smart contracts across top blockchain platforms was $178 billion as of April month-end, down -9.6% MoM. The value locked across all the top chains were down except for Terra which was up slightly at 2.1%. Terra also continued to gain more share of TVL (16%) across top blockchain platforms and is the second largest after Ethereum. Similar to prior month, the largest detractor in total value locked was Fantom at -32.6%. Despite TVL being down 11% for Ethereum, it continues to be the dominant smart platform (63%). Overall, these metrics suggest the DeFi ecosystem continues to be bearish on fears of Fed tightening and macro-headwinds.
Monthly revenue generated by popular DeFi protocols continued to decline (-3.6%) as usage slowed across major DeFi protocols. The total monthly revenue as of April month-end was $159 million. Meanwhile, cumulative DeFi revenue has remained flat at around $4.4 billion.
The total value of deposits for the three largest lending protocols (Aave, Compound and Maker) at the end of April was $30.1 billion (-7% MoM) while the total value of borrowing was $16.6 billion (flat MoM). When decomposing month over month changes, Aave was the only lending protocol where deposits (+2%) were up. Loans were also up for Aave (+10%) and Compound (+19%) while the others continued to decline.
Source: Dune Analytics
DEX activity continued to slow down with total trade volume for the month of April staying relatively flat from prior month at around $86 billion. Recent months volume continues to print more growth relative to prior year though less overtime.
There doesn’t seem to be any indication of short-term factors that could reverse the bearish trend for crypto markets. However, we do know that crypto is becoming a recognized global financial asset as sovereign nations and traditional institutions adopt DeFi products and bring liquidity on-chain. The latest example is Jane Street Capital, a large market maker, borrowing up to $25 million in the stablecoin USDC through a DeFi Protocol (Clearpool) offering permissionless pools. Increasing activity and interest in the DeFi market is a testament that millions of people, institutions and sovereign nations, are planning to participate in a new economic system that is powered by code—one that sets new standards for financial access, opportunity and trust.
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