DeFi TVL hits $100B: Solana and BSC surge in march 2024

Delve into growth driven by Solana, Base, and BSC, along with EigenLayer’s significant advancement to become the second-largest DeFi protocol.
Delve into growth driven by Solana, Base, and BSC, along with EigenLayer’s significant advancement to become the second-largest DeFi protocol.

Highlights: 

  • In March 2024, the DeFi market saw a significant upturn and the total value locked surpassed the $100 billion mark for the first time since May 2022. The total daily trading volume was close to $14 billion.
  • Solana, Base and BSC showed a remarkable increase in TVL with 95%, 69% and 54% monthly growth respectively with lending and liquid staking being the main growth drivers. 
  • Uniswap's UNI token rallied by 70%, sparking increased trading activity across various DeFi protocols and leading to a shift of capital from AI tokens to DeFi tokens. This surge was attributed to a proposed change in the fee mechanism to benefit UNI token stakers.

Forecast

The overall crypto market momentum has made staking and lending activities very attractive. This 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

The DeFi sector experienced significant growth in March 2024, as the total value locked exceeded $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 Ethena Labs' USDe also showcases a strong bullish trend.

Analysis

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. 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 such as Aave or Compound, typically range between 5% and 15%. According to Ethena Labs founder Guy Young, USDe's yield is verifiable and generated through sustainable financial strategies. Terra Luna linked Anchor on the other hand was backed by venture capital funds without a sustainable yield-generation mechanism. The current high APY is explained by the market’s bullish momentum and is connected with stETH and ETH perpetual futures popularity. 

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. This move was part of a strategic initiative to foster natural growth within the ecosystem. Restaking protocols such as 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. The assets can be used to secure and validate additional networks and serve to generate supplementary yields in various DeFi protocols. EigenLayer’s move brings restaking to the 6th place in the category rankings on DeFiLlama.