DeFi Token Surges, TVL Touches Highest Value Since Q2 2022

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November 2024 has been a month of momentum for the decentralized finance (DeFi) sector. After the past few months of pressing market uncertainty, the sector is showing significant signs of recovery, especially regarding investor confidence.

This revival is reflected in the significant surge in the prices of DeFi tokens, with some of them recording gains of more than 50%. Not only that, the DeFi protocol also managed to record a total locked value (TVL) that reached US$118.25 billion on 26 November, 2024-a figure that was last recorded in May 2022, indicating that the market is starting to find its stability again.

This return of investor confidence is a positive signal for DeFi’s future, as the sector is increasingly recognized as an innovative alternative in global finance.

What is DeFi?

Decentralized Finance (DeFi) is an ecosystem of financial applications built on blockchain technology, enabling transactions and services without intermediaries like banks. By leveraging blockchain’s transparency, security, and openness, DeFi offers a more inclusive and efficient alternative to traditional finance.

Historically, financial services such as savings, loans, and insurance were centralized, requiring a bank account or institutional membership. Blockchain technology, starting with Bitcoin, changed this by allowing asset transfers without the need for banks, opening up new financial possibilities. DeFi extends beyond cryptocurrency, encompassing services like lending, insurance, and peer-to-peer transactions.

DeFi removes the need for traditional financial institutions, using smart contracts to facilitate direct transactions between users. This creates a more open, fair financial system, empowering individuals globally, including those previously excluded from conventional finance. DeFi can potentially transform the global financial landscape, providing broader access to financial services.

What is a DeFi Token?

In the world of blockchain and cryptocurrencies, tokens refer to digital units developed by a particular project’s developers and run on top of an existing blockchain network. While tokens are often confused with cryptocurrencies, they significantly differ in purpose and function.

For example, tokens used in DeFi applications are tokens specifically designed to facilitate transactions or services within the DeFi ecosystem. Despite having a tradable value, these DeFi tokens cannot be used as currency on major blockchain networks like Ether on Ethereum. Their function focuses more on supporting decentralized applications, such as lending, savings, or asset trading.

The big advantage of this system is that transactions no longer require a third party for verification or execution. Instead, they are carried out using computer code organized in smart contracts, which provides users with transparency and trust.

Even without banks and financial institutions, you can still benefit from interest margins, borrow assets, buy and sell tokens, or even save within the network. All of these functions are carried out using digital assets. Still, the one used as a transaction tool is the DeFi token, which was developed specifically for the needs of decentralized applications in the system.

DeFi Token Surge After Meme

Throughout November 2024, native tokens from various DeFi protocols experienced remarkable growth, signaling a resurgence in the sector. Data from CoinGecko reveals that older DeFi tokens launched before 2022 saw significant price surges, with some major tokens reaching impressive milestones.

Among the leading tokens, Curve Finance (CRV) led the way with a 116.7% increase over the past 30 days, followed by dYdX (DYDX), which gained 62.1%, Uniswap (UNI) with a 54.4% jump, Pancakeswap (CAKE) at 57.4%, and Lido (LDO) rising 60.8%. These price movements reflect a renewed investor interest in long-established DeFi projects.

In addition to these older tokens, new entrants in the DeFi space have also shown strong performance. Tokens from projects like Ethena (ENA) and Ether.fi (ETHFI), and GMX all saw growth of over 50%. Specifically, ENA surged 80%, ETHFI rose 58.3%, and GMX gained 54.5%. This upward trend highlights a growing enthusiasm for DeFi as the sector begins to recover from past challenges and looks poised for future expansion.

The Total Value Locked (TVL) in DeFi protocols also saw a significant boost, reaching $147.164 billion by 29 November 2024, according to data from DefiLlama. This marks the highest TVL since May 2022, reflecting investors’ increasing confidence in decentralized finance platforms and signaling a broader rebound in the DeFi market.

Alongside the surge in DeFi tokens, analysts have observed shifts in the broader cryptocurrency market. Bitcoin’s market dominance, which had previously been above 60%, dropped below that threshold between November 18 and 22, 2024. This decline in Bitcoin’s dominance presents fresh opportunities for altcoin diversification.

According to an analyst from Bitwise, a prominent asset management firm that offers a Bitcoin spot ETF, the decrease in correlation between major altcoins and Bitcoin has led to more diverse investment strategies. “We’re seeing more variation in the performance of altcoins. The investment narrative for altcoins is now more diverse, and the strong correlation with Bitcoin has weakened significantly, creating more opportunities for alpha generation and greater diversification,” they noted.

This shift suggests that the DeFi ecosystem is becoming increasingly attractive to investors. With greater diversification in market narratives and growing investor confidence, DeFi offers many opportunities to expand their portfolios in a dynamic and rapidly evolving market.