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CryptoEconomic ResearchCodefi

DeFi Market Commentary | March 2022

An analysis of the decentralized finance market in March 2022
by James ChungApril 8, 2022
DeFi Market Commentary March 2022

It has been a strong month for the DeFi sector as majority of top tokens returned double-digit gains.  Positive moves by crypto beta (Bitcoin and Ethereum) helped to lift sentiment across the sector.  The performance of the DeFi Pulse Index (DPI) which is a capitalization-weighted index that tracks the performance of DeFi performed -23.8% year-to-date and +43% month-to-date.  While, crypto beta, ETH performed -8.9% year-to-date and +29% month-to-date and BTC performed -0.3% year-to-date and +24% month-to-date.

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Source: CoinGecko

As of March, the DeFi market cap (top 100 DeFi coins by Market Capitalization) also bounced back from its recent slump to $139 billion, levels seen earlier in the year.

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Source: CoinGecko

Positive adoption, albeit at slower rate, continued as the number of DeFi wallets grew to 4.6 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

The total value locked (TVL) in smart contracts across top blockchain platforms was $197 billion as of March month-end (+13% MoM).  The data suggests that the DeFi ecosystem is continuing to expand and bring economic value as new protocols and blockchain networks launch. Ethereum which makes up for more than 60% of TVL rebounded to $127 billion (+15% MoM). The largest positive month over month change was Terra at +44.7% while the largest detractor was Fantom at -42.1%.

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Source: The Block

Monthly revenue generated by popular DeFi protocols continued to decline (-12.5%) as usage slowed across major DeFi protocols.  Uniswap was the only DEX to have a positive MoM change (+2.0%).  The total monthly revenue as of March month-end was $165 million, levels similar to last year.  Meanwhile, cumulative DeFi revenue continues to make new all-time highs, growing to be over $4.3 billion since June of 2020.

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Source: The Block
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Source: The Block

The total value of deposits for the three largest lending protocols (Aave, Compound and Maker) was $32.5 billion (+12% MoM) while the total value of borrowing was $16.6 billion (+10% MoM) as of March month-end.  When decomposing month over month (MoM) changes, Aave was the only lending protocol where both deposits (+42%) and loans (+49%) were significantly up while others continued to decline.  This can be explained by Aave’s v3 upgrade that went live on March 16, 2022.  Along with many other features, the introduction of cross chain “portals” allows users to swap assets from any blockchain from which Aave is deployed.  These features have made Aave more lucrative for lenders and borrowers as it improves trust, access and security in the protocol.

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Source: Dune Analytics

DEX activity continued to slow down with total trade volume for the month of March reaching $86 billion, down 3.4% from prior month and lowest level since July 2021.  However, recent months volume continues to print more growth relative to prior year.     

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Source: Dune Analytics

DeFi continues to demonstrate resilience despite macro and geopolitical headwinds weighted on global risk sentiment.  Metrics, such as 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 such as UK unveiling plans to become global hub for crypto is a testament that millions of people, including sovereign nations, are planning to use 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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