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CryptoEconomic ResearchCodefi

DeFi Market Commentary | January 2022

An analysis of the decentralized finance market in January 2022
by James ChungFebruary 1, 2022
DeFi Market Commentary JAN2022

Since reaching an all time high of $174 billion mid-November of last year, the DeFi Sector (top 100 DeFi coins by Market Capitalization) has fallen to $105 billion as of January month-end. The downward spiral continued as the macro narrative to tackle inflation using interest rate hikes made all investments, not just crypto, less attractive relative to the new and improved “risk free” rate. During the downward market, ETH and EVM compatible chains proved themselves superior to other chains as decentralized applications suffered significant downside. An example of this was Solana, where it suffered several outages despite being able to handle more transactions per second than Ethereum. A sudden spike in the number of computing transactions stressed and caused network congestion for Solana.

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Source: CoinGecko

Despite the downturn, adoption continued as the number of DeFi wallets grew to 4.3 million unique addresses this month. Although users may have multiple wallets/addresses this data point serves as a worthy pulse on the overall health of the DeFi ecosystem.

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Source: Dune Analytics

The total value locked on Ethereum dropped to $112 billion in the month of January after reaching an all time high of $167 billion mid-November. Despite the drop, Ethereum still remains to be the dominant chain commanding ~60% of the entire DeFi TVL.

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Source: The Block

Monthly revenue generated by popular DeFi protocols has declined back to summer levels of last year at around $280 million. However, SpookySwap, a DEX for the Fantom Opera network has doubled it’s revenue since December 2021. Overall, the cumulative revenue has grown to be over $3.9 billion since June of 2020.

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Source: The Block
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Source: The Block

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 January was $31.2 billion, down 26% on average since December while the total value of borrowing was $14.9 billion, down 23% on average since December.

image 1 2
Source: Dune Analytics

The performance of the DeFi Pulse Index (DPI) which is a capitalization-weighted index that tracks the performance of DeFi performed +61.4% since January 2021 and -36% year-to-date. Meanwhile, ETH performed +246.7% since January 2021 and -30% year-to-date, outperforming both Bitcoin and the index.

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Source: CoinGecko

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. Countless number of institutional DeFi milestones in 2021, demonstrates an “up only” journey of institutional interest in 2022.


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