In March 2024, the decentralized finance (DeFi) market witnessed a significant upsurge, with the total value locked (TVL) surpassing the $100 billion mark for the first time since May 2022. This milestone was accompanied by a substantial increase in daily trading volume, reaching close to $14 billion.
Notable Performers: Solana, Base, and BSC
Among the notable performers in March 2024 were Solana, Base, and BSC, which recorded remarkable monthly growth rates of 95%, 69%, and 54%, respectively. The primary drivers behind this growth were lending and liquid staking activities.
Uniswap’s UNI Token Rally
The UNI token, native to the Uniswap protocol, experienced a significant surge in value, increasing by 70%. This rally sparked increased trading activity across various DeFi protocols, leading to a shift of capital from AI tokens to DeFi tokens. The primary reason behind this surge was a proposed change in the fee mechanism, which would benefit UNI token stakers.
Forecast: Continued Growth for Major Chains
Given the overall crypto market momentum, staking and lending activities have become increasingly attractive. This trend contributed to the TVL growth of major chains such as ETH, Solana, and BSC. If the broader crypto market sentiment remains positive throughout the remaining pre-halving period, these chains are likely to attract even more funds in the coming months.
Sentiment: Strong Investor Confidence
The DeFi sector experienced significant growth in March 2024, with the total value locked exceeding $100 billion. This indicates strong investor confidence and sector vitality. The rapid expansion of protocols such as EigenLayer, Jito, and Kamino, as well as the high yields on offer from Ethena Labs’ USDe, showcases a strong bullish trend.
Analysis: Ethena Labs’ USDe Stablecoin
Ethena Labs has been attracting attention in the DeFi space in February and March for its USDe stablecoin, which currently offers an extraordinarily high (dynamic) staking yield of 60% APY. This yield is generated through a combination of ETH staking returns and the funding rate on short Ether perpetual futures.
High APY Raises Red Flags
The high APY offered on a stablecoin has raised red flags in the crypto community, as the Terra-LUNA ecosystem collapse is still in recent memory. Traditional stablecoin yields, such as those offered by borrowing platforms like Aave or Compound, typically range between 5% and 15%.
Ethena Labs Founder’s Response
According to Ethena Labs founder Guy Young, the USDe yield is verifiable and generated through sustainable financial strategies. He distinguished Ethena Labs’ approach from the Terra Luna linked Anchor, which was backed by venture capital funds without a sustainable yield-generation mechanism.
Market’s Bullish Momentum
The current high APY is explained by the market’s bullish momentum and connected with stETH and ETH perpetual futures popularity. The combination of these factors has created an environment conducive to high yields on stablecoins like USDe.
EigenLayer Reaches New Heights
EigenLayer became the second-largest DeFi protocol after its staking cap was temporarily lifted. It reached a total value locked of more than $11 billion, which is a 475% increase from January. EigenLayer’s TVL began its rapid growth on February 5, when the protocol decided to temporarily lift its staking cap.
Strategic Initiative
This move was part of a strategic initiative to foster natural growth within the ecosystem. Restaking protocols like EigenLayer allow validators and stakers to re-allocate liquid staking derivative tokens such as Lido Staked ETH and RocketPool’s rETH to second-order staking activities.
Rankings: DeFiLlama
EigenLayer’s move brings restaking to the 6th place in the category rankings on DeFiLlama, a leading DeFi data platform. This achievement highlights the growing importance of restaking protocols within the DeFi ecosystem.
In conclusion, March 2024 marked a significant upturn for the DeFi market, with TVL surpassing $100 billion and daily trading volume reaching near-$14 billion. Notable performers included Solana, Base, and BSC, while Uniswap’s UNI token rally sparked increased trading activity across various DeFi protocols.
The overall crypto market momentum has made staking and lending activities increasingly attractive, contributing to the growth of major chains like ETH, Solana, and BSC. If the broader crypto market sentiment remains positive throughout the remaining pre-halving period, these chains are likely to attract even more funds in the coming months.
Investor confidence is high, with protocols like EigenLayer experiencing rapid expansion and USDe stablecoin offering unusually high yields. However, the Terra-LUNA ecosystem collapse serves as a reminder of the importance of sustainable financial strategies and verifiable yields.
As the DeFi market continues to evolve, restaking protocols like EigenLayer are gaining prominence within the ecosystem. Their ability to foster natural growth and offer supplementary yields in various DeFi protocols is becoming increasingly attractive to investors.
Overall, March 2024 marked a significant milestone for the DeFi market, with TVL surpassing $100 billion and notable performers emerging across various chains. As the market continues to grow and evolve, it will be interesting to see how these trends shape the future of DeFi.
