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CryptoEconomic ResearchCodefi

DeFi Market Commentary | February 2022

An analysis of the decentralized finance market in February 2022
by James ChungMarch 4, 2022
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As investors continue to ditch riskier assets this year in anticipation of rising interest rates, the on-going conflict between Ukraine and Russia has resulted in additional headwinds for the cryptocurrency market.  To the contrary, February showed some signs indicating that the markets may have been oversold with the price of beta (BTC and ETH) being nearly flat for the month following a dramatic sell-off in January. 

Lately, the DeFi sector (top 100 DeFi coins by Market Capitalization) has been trending higher to $120 billion since making its new low this year.

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Source: CoinGecko

Positive adoption, albeit at slower rate, continued as the number of DeFi wallets grew to 4.4 million unique addresses this month.  Although users may have multiple wallets or addresses, this data point serves as a worthy pulse on the overall health of the DeFi ecosystem.

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Source: Dune Analytics

Since last month, the total value locked on Ethereum dropped 1.8% to $110 billion in February, levels similar to what we’ve seen last September.  Despite the drop, Ethereum continues to be the dominant chain across smart contract platforms.

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Source: The Block

Monthly revenue generated by popular DeFi protocols continued to decline as usage slowed across major DeFi protocols.  The total monthly revenue as of February month-end was $189 million. Meanwhile, cumulative DeFi revenue continued to make new all-time highs, growing to be over $4.2 billion since June of 2020.

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Source: The Block
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Source: The Block

Deposits and loans continue to decrease across several major lending protocols which demonstrates continued risk-off behavior. However, the rate at which deposits and loans declined slowed in February. The total value of deposits for the three largest lending protocols, Aave, Compound and Maker, at the end of February was $28.9 billion, down 7% on average since January while the total value of borrowing was $15 billion, down 1% on average since January. 

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Source: Dune Analytics

DEX activity continued to also slow down with total trade volume for the month of February reaching $89 billion.  However, it’s worth noting that the recent months volume has still printed more growth relative to prior year.     

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Source: Dune Analytics

Volatile assets declined further in the new year due to macro headwinds. The performance of the DeFi Pulse Index (DPI) which is a capitalization-weighted index that tracks the performance of DeFi performed -46.7% year-to-date and -16.3% month-to-date.  Meanwhile, Crypto beta: ETH performed -29.2% year-to-date and 0.7% month-to-date while BTC performed -19.9% year-to-date and -0.5% month-to-date.

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Source: CoinGecko

Despite the broader crypto markets pulling back after a relatively exuberant period, continued growth in DeFi wallets, total value locked and cumulative revenue continue to demonstrate adoption and usage over the longer-term.  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.  


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