DeFi Market Commentary | December 2021
Cryptocurrencies have generally been categorized as risk-on assets as they have amplified any sizable movements of the stock market. This was evident in 2021 as stimulus and vaccine progress spurred economic growth including major cryptocurrencies. However, December was a different month as the focus shifted towards the impending removal of central bank stimulus, interest rate increase and rising cases of Covid omicron variant. As a result, Bitcoin, Ethereum and DeFi (measured by DeFi Pulse Index) were all down for the month of December. However, when zooming out and looking at the full-year, the DeFi sector (top 100 DeFi coins by Market Capitalization) has reach new highs and ended the year at $149 billion.
As adoption continues, the number of DeFi wallets continue to grow and has reached new all-time highs with 4.3 million unique addresses this month. Although users may have multiple wallets/addresses this datapoint still serves as a worthy pulse on the overall health of the DeFi ecosystem.
These wallets interact with various products across different DeFi protocols to predominately borrow, lend and exchange cryptocurrencies. Therefore, it’s not surprising to see the total value locked in DeFi also trending higher and demonstrating real value for DeFi users. The total value locked dropped to $86 billion in the month of December following an up-trend for the year.
Monthly revenue generated by popular DeFi protocols has been stable year-to-date and averaging $256 million a month for its users and token holders while cumulative revenue has grown to be over $3.4 billion since June of 2020.
The total value staked in the ETH 2.0 contract has been steadily increasing as well and continues to provide yield bearing opportunities in DeFi. Over $8.8 million has been staked, representing 7.4% of the circulating supply.
Deposits and loans have decreased for the month across several lending protocols. The total value of deposits for the 3 largest lending protocols at the end of December was $37.7 billion, down 18% on average since November. The total value of borrowing was $20.8 billion, down 8% on average since November.
The performance of the DeFi Pulse Index (DPI) which is a capitalization-weighted index that tracks the performance of DeFi performed +154% year-to-date and -15% month-to-date. Meanwhile, ETH performed +393% year-to-date and -16% month-to-date, outperforming both Bitcoin and the index.
The growth in DeFi wallets, total value locked and cumulative revenue are just some of the activities we monitor and analyze here at ConsenSys as capital continues to flow within the Ethereum ecosystem. Increasing activity and interest in the DeFi market is a testament that millions of people are using Ethereum blockchain to build and participate in a new economic system that is powered by code—one that sets new standards for financial access, opportunity and trust. 2021 outperformed 2020 at every moment not just those mentioned here. Hopefully this trend will continue into 2022.
Cryptofunds, market makers, and trading desks can interact with DeFi protocols with MetaMask Institutional
MetaMask Institutional offers unrivaled access to the DeFi ecosystem without compromising on institution-required security, operational efficiency, or compliance requirements. We enable funds to trade, stake, borrow, lend, invest, and interact with over 17,000 DeFi protocols and applications.
Found this research useful? Connect with the ConsenSys Cryptoeconomic Research team at [email protected]
Disclaimer: ConsenSys Software Inc. is not a registered or licensed advisor or broker. This report is for general informational purposes only. It does not constitute or contain any individual investment advice and is made without any regard to the recipient’s objectives, financial situation, or means. It is not an offer to buy or sell, or a solicitation of any offer to buy, any token or other investment, nor is it intended to be used for marketing purposes to anyone in any jurisdiction. ConsenSys does not intend for any person or entity to rely on any facts, opinions, or ideas, and any financial or economic commentary expressed in this report may not be relied upon. ConsenSys makes no representations as to the accuracy, completeness, or timeliness of the information or opinions in this report and, along with its employees, does not assume any responsibility for any loss to any person or entity that may result from any act or omission based upon this report. This report is subject to correction, completion, and amendment without notice; however, ConsenSys has no obligation to do so.