After a brilliant start to 2021, with token valuations and trading volume spiked to fuel the current bull, the DeFi sector took a hiatus overall while the NFT sector stepped into the limelight.
While investor attention was elsewhere, DeFi prices had time to consolidate and developers could focus on protocol upgrades.
Data from Cointelegraph Markets and TradingView show that several DeFi tokens, including Aave (AAVE), Synthetix (SNX), YFI, and SushiSwap (SUSHI), have been trading since the 10th all-time high.
The recent upward trend in DeFi tokens has led some analysts to point out that “DeFi Summer 2.0” actually happened, and on a much larger scale than anyone expected.
You all wanted DeFi Summer 2.0? Well it’s here, but on a much larger scale and multichain.
First Matic with its $ 40 million incentive program (1% of the offer)
Then Avalanche with $ 180 million (now worth ~ $ 450 million)
Today Fantom and Celo with 300 and 100 million US dollars respectively.
Solana and Terra next?
– Ryan Watkins (@RyanWatkins_) August 30, 2021
On-chain metrics show that DeFi is heating up
Evidence that the DeFi space is heating up can be found in various on-chain metrics, indicating a healthy amount of trading activity and an increasing number of new users interacting with DeFi and DEX protocols.
According to data from Dune Analytics, the number of new subscribers joining the DeFi ecosystem has increased steadily over the past year, reaching a record 3,285,643 total users as of August 31st.
The steady surge in new users has helped increase the activity of the DeFi credit logs and the decentralized exchanges (DEX), with data from Dune Analytics showing that weekly DEX volume in August reached levels not seen since the end of May.
For those who fear that high transaction fees on the Ethereum (ETH) network could limit the ability for smaller investors to get in touch with the sector, the growing field of Layer-Two (L2) solutions such as Loopring (LRC) and cross-chain bridges to competing networks like the Solana, ensure portfolios of all sizes can participate in DeFi investments.
One of the best examples of this is the rapid rise of the Polygon (MATIC), a Layer 2 network that has become a high-level blockchain in terms of Total Value Locked (TVL). Data from Defi Llama shows Polygon is now the fourth largest chain in terms of TVL, with more than $ 4.93 billion on the network.
With Bitcoin still struggling to gain momentum below $ 50,000, it is possible that the market is headed for an altcoin season, and if it does, the top DeFi protocols with strong long-term fundamentals are likely to benefit from the upward momentum .
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.