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More: Decentralized Finance (DeFi): Revolutionizing Traditional Financial Systems

Decentralized Finance has recently demonstrated strong potential for growth in recent days, thanks to the impressive surge of crucial metrics including total value locked (TVL) and active loans.

Token Terminal, a cryptocurrency data analytics platform, went on social media to comment about the state of DeFi in 2024 after taking note of the promising metrics. According to Token Terminal’s X post, DeFi is waking up again with active loans reaching levels that were last experienced in 2022 totaling $13.3 billion. 

Active DeFi Loans

These loans are a vital component of decentralized finance since they allow investors to lend out their cryptocurrency holdings to borrowers. The investors earn yield in return. Lending and borrowing activity has become a crucial metric for determining participation in DeFi and gauging the market’s overal health.

At the height of the cryptocurrency bull run in 2021, active loans across decentralized finance reached a peak of $22.2 billion. At the time, Bitcoin and Ethereum were trading at the highest levels, $69,000 and $4,800. Later on, the total active loans fell by 53% to $10 billion - and soon after, the price fell further to $3.1 billion at the start of 2023.  

However, since the 2023 low, the activity across DeFi lending has been improving as illustrated by insights from Token Terminal. The crypto analytics platform has reiterated that increasing active loans are an indication that cryptocurrency traders are leveraging their positions in preparation of a bull market.

Total Value Locked (TVL)

Decentralized Finance total value locked or TVL also suffered a massive dip in 2023 after falling by over 80% from its peak of $180 billion in November 2021 to October 2023’s $37 billion. Meanwhile, the total value locked has significantly recovered since October 2023 and now stands at $96.5 billion after a staggering 160% positive change, as per data by DeFiLlama. Moreover, decentralized finance TVL doubled in H1 2024 from $54 billion to $109 billion in June.

On July 30, the founder of Humble Farmer Taiki Maeda told his X followers that the space is approaching a moment of renaissance in the history of DeFi after nearly four years of extreme bearishness. In his post, Maeda was talking about popular decentralized lending/borrowing protocol Aave, which he pointed out was anticipating to outperform as indicated by the increasing demand of its native stablecoin GHO. Maeda also highlighted the steps that Aave was taking to boost its DAO by introducing lower cost transactions and new opportunities for revenue.

Meanwhile, data from CoinGecko indicates most of the tokens in the decentralized finance ecosystem are still within the bearish region. He pointed out that some of the previous bull market’s DeFi tokens like Aave, Curve DAO and Uniswap are trading approximately 80% down from their all time highs in 2022. 

Related: DeFi Traders vs. Hackers: Lost Battle

Nonetheless, there is also increasing decentralized finance activity taking place on Bitcoin right now with the continued innovation of Layer 2 solutions on the largest network. These Layer 2s are helping onboard new opportunities for Bitcoin holders including yield farming, staking, DeFi lending and borrowing, as well as liquidity provision.

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