DeFi adoption varies across chains, BTC price affects velocity – Crypto News – Crypto News
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DeFi adoption varies across chains, BTC price affects velocity DeFi adoption varies across chains, BTC price affects velocity

De-fi

DeFi adoption varies across chains, BTC price affects velocity – Crypto News

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3 years ago

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Upland: Berlin Is Here!

The ‘DeFi Summer’ of 2020 was a turning point in the blockchain industry, as the season saw the debut of several DeFi projects, signaling the dawn of a new era in finance.

DeFi’s evolution during this period didn’t just make waves; It catalyzed a paradigm shift, positioning itself as the bold trailblazer of this unprecedented movement.

Yet, what does the momentum that the industry felt in 2020 look like in terms of hard data?

Today, with token prices down up to 90% as we navigate the murky waters of the current bear market, we look at the velocity of DeFi adoption and the impact of market cycles on adoption.

DeFi TVL analysis by chain since 2017

Against this backdrop, our analysis focuses on data collected from 2018 to 2023, with an emphasis on adoption across chains such as Ethereum, Tron, BNB Chain (BSC), Arbitrum, Polygon, Optimism, Avalanche, Mixin, PulseCronos, Solana, Cardano, and Osmosis.

defi tvl
Source: DefiLlama

The table below shows the chains analyzed, the date the chain reached its all-time high for TVL (as tracked by DefiLlama,), the time it took to get its all-time high since launch (velocity), its all-time high (ATH), and the current TVL.

chains Activity start* ATH Date ATH TVL Velocity Current TVL
Ethereum October 2017** October 2021 $108.92B 1280 days $25.73B
Tron October 2020 October 2021 $6.74B 470 days $5.69B
bsc October 2020 June 2021 $21.94B 186 days $3.36B
Arbitrum October 2021 June 2023 $2.53B 614 days $2.12B
Polygon October 2020 May 2021 $9.89B 249 days $0.97B
optimism June 2021 August 2022 $1.15B 393 days $0.92B
avalanche February 2021 October 2021 $11.41B 302 days $0.66B
mixin October 2021 May 2022 $0.59B 182 days $0.44B
Pulse June 2023 June 2023 $0.49B 5 days $0.34B
Chronos October 2021 May 2022 $3.22B 145 days $0.32B
Solana October 2021 October 2021 $10.03B 236 days $0.31B
cardano January 2022 June 2022 $0.33B 81 days $0.18B
osmosis May 2021 June 2022 $1.83B 253 days $0.13B

The chart below visualizes the velocity of each chain in reaching its all-time high in TVL. The DeFi pioneer, Ethereum, has technically had DeFi activity since 2017, and thus it stands out as the slowest adoption, given its all-time high was not reached until Nov. 2021.

Interestingly, November 2021 coincides with the all-time high for Bitcoin and likely impacted DeFi on Tron and Solana, which also saw peaks at this time.

defi tvl
Source Data: DefiLlama**

Bitcoin adjusted velocity

As Bitcoin is seen as a barometer for the overall health of the cryptocurrency market, the velocity of DeFi adoption was adjusted based on Bitcoin’s price at each chain’s DeFi launch.

CryptoSlate cross-referenced the price of Bitcoin with the all-time high data to create a Bitcoin-adjusted velocity (BaV) for each chain.

The chart below’s gray line and plot points represent the BaV for each chain. The chart reveals that the DeFi ecosystems of Tron, Polygon, and BSC were all positively impacted by Bitcoin’s price and the supporting bullish sentiment of the market.

btc adjusted defi
Source Data: DefiLlama***/ Yahoo Finance

Analysis of chain velocity

Ethereum was removed from the above chart for readability as it recorded a massive 7,936 velocity score compared to the next closes, with Tron at 1,065 and Arbitrum at 829.

With the bear market factored in, Pulse’s velocity reduced, giving it a score of just 10.98, as it reached its ATH in just 5 days. The next lowest was Cardano at 109, some ten times higher.

Using the BaV metric, it appears the best-performing chains were Pule, Cardano, Cronos, Solana, and Osmosis. While Ethereum, Tron, and Arbitrum stood out as having the slowest velocity.

Tron is one of the chains currently closest to its ATH, with a strong performance in 2023. Should it pass its ATH of $6.47 billion from its current level of $5.6 billion, it may surpass Ethereum on the BaV and standard measures of velocity.

tron tvl
Source: DefiLlama

The diverse trajectories of DeFi adoption across different blockchain networks underscore the importance of timing, market conditions, and the inherent advantages of being an early mover in the space. However, as the remarkable case of Pulse shows, even newcomers can achieve rapid growth with aligning the right factors.

Understanding the data

The speed at which you reach the all-time high in TVL is a complex metric. Some may argue that the faster you go up, the quicker you come down, and that is definitely the case for some chains.

However, the fundamental factors under analysis here concern momentum and adoption. Furthermore, all the projects listed recorded at least $330 million locked, with most over $1 billion. These are not projects with low market cap and low liquidity.

The projects analyzed in this article are critical to identifying the strengths and weaknesses of the historical DeFi onboarding process. The average time it took for a chain to reach its ATH was around 338 days, meaning, outliers aside, most chains take almost a year to peak in DeFi activity.

* Launch date refers to the date of the first data tracked by DefiLama for each chain**
** Using MakerDAO’s DAI launch as the date for the Ethereum DeFi launch and data according to CoinmarketCap’s historical data.
*** Additional data included due to DefiLlama 2020 cut-off date.

Posted In: avalanche, cardano, Cosmos, Ethereum, optimism, Polygon, Solana, Tron, Binance, crypto.com, Analysis, DeFi
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