3 key reasons why the DeFi sector is booming again

Thursday 14 January 2021, 3:45 AM AEST - 2 weeks ago

Data from Messari shows that over the past 30 days, the majority of tokens listed on the sites DeFi Assets index have rallied by more than 20%. A few standouts such as Maker's MKR, Synthetic Network Token (SNX) and SushiSwap's SUSHI gained more than 100% during the same time frame.

27f682b0-3b53-4365-bdd1-7513b835b2cb.pngDeFi assets index. Source: Messari.io

From Jan. 1 to Jan. 9, the decentralized finance sector saw its total value locked (TVL) rise from $15.678 billion to a record-high $23.092 billion, and this recovery to a new all-time high came about four months after the DeFi bull market abruptly came to an end.

Now that Bitcoin (BTC) and Ether (ETH) have rallied to multiyear highs, investors are again turning their attention to the DeFi sector, and it's likely that the start of a new bull market, soaring TVL in the top DeFi platforms, and the steady integration of Ethereum alternatives are the primary reasons for the current surge.

Bitcoin and Ethereum carry the market higher

The last few months of bullish price action from Bitcoin and Ether are undoubtedly having a positive effect on the entire cryptocurrency market. Currently, the combined market capitalizatio of the top two digital assets is more than $850 billion, comprising 80% of the total value of the cryptocurrency market.

As the prices of the top cryptocurrencies rise, some investors look for ways to maximize their profits, and the high staking yields and four-digit investment returns offered by many of the small-cap tokens have proven to be an irresistible lure to traders.

Historical data shows that when Bitcoin and Ether prices are rallying, altcoins tend to follow, and when Bitcoin consolidates in a "predictable" range, altcoins and DeFi tokens usually rally. This market dynamic could partially explain the recent surge in DeFi tokens.

Total value locked is on the rise

Data from DeFi Pulse shows that the total value locked across DeFi protocols has increased from $15.36 billion to $22.74 billion over the past 10 days. This sharp increase in TVL coincides with Bitcoins rally from $29,000 to ...

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