Ethereum's DeFi Space Is Exploding According to These 4 Metrics

Ethereum’s DeFi Space Is Exploding According to These 4 Metrics

Nick Chong

Last Updated: August 5, 2020 3:00 am

2 mins read

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Despite volatility in the Ethereum market, decentralized finance (DeFi) — which some argue is the killer use case for the cryptocurrency — has continued to see rapid growth in recent months.

Ethereum’s DeFi Space Is Seeing Rapid Growth

Spencer Noon, the head of the cryptocurrency fund DTC Capital and an on-chain analyst, noted on August 4th that four pivotal metrics show DeFi is ‘breaking out in spectacular fashion.” These four metrics are as follows:

There is now $4.27 billion worth of cryptocurrency (ETH, DAI, Tether’s USDT, and other altcoins) locked in DeFi contracts.
There are now 300,000 users of DeFi protocols, with this number rapidly approaching one million as it goes parabolic.
There has been $10 billion traded on decentralized exchanges (mostly Ethereum-based ones) in the past 12 months.
There is $1.42 billion worth of debt issued by DeFi protocols that is still outstanding.

DeFi, an industry that is barely a few years old, is breaking out in spectacular fashion:

1⃣ $4.27B total value locked
2⃣ 300K users w/ 1M in sight
3⃣ $10B trailing 12-mth DEX vol
4⃣ $1.42B debt outstanding

Once again in the crypto world it's all eyes on Ethereum, not Bitcoin. pic.twitter.com/iG7lO2v2hE

— Spencer Noon 🕛 (@spencernoon) August 4, 2020

ETH Could Benefit From DeFi Boom

The growth of Ethereum’s decentralized finance sector is likely to cause growth in the value of ETH.

Ryan Sean Adams, the founder of Mythos Capital, expects for DeFi to drive record levels of demand for Ethereum transactions and ETH. Assuming decreasing supply due to the implementation of proof of stake and EIP-1559, this means that the asset may appreciate over time.

This optimistic sentiment has been echoed by Spencer Noon. Noon recently wrote on Twitter that from his contacts, institutional interest in DeFi is first materializing in interest in Ethereum, not DeFi coins or protocols:

“My read on #DeFi after speaking with instl investors, fund mgrs, OTC desks, and FOs over the last few wks: The herd is coming. They’re excited about DeFi but new to it, so they’re buying $ETH first. Once positions are set, I expect them to move up the risk spectrum to protocols.”

My read on #DeFi after speaking with instl investors, fund mgrs, OTC desks, and FOs over the last few wks:

The herd is coming. They’re excited about DeFi but new to it, so they’re buying $ETH first. Once positions are set, I expect them to move up the risk spectrum to protocols.

— Spencer Noon 🕛 (@spencernoon) August 3, 2020

DeFi increasing demand for ETH is a trend that some are already noticing. A cryptocurrency commentator noted recently that the number of ETH locked in DeFi protocols (their smart contracts) is a metric up nearly 30% in the past 30 days:

“Here’s a chart which didn’t correct last night, and it’s up by nearly 30% over the past month. More people are LOCKING & USING their $ETH as a high quality collateral asset / store of value, to use in #DeFi on #Ethereum.”

How much ETH will rally off of DeFi-related network effects, though, is not yet clear.