DeFi ‘Waking Up’ as Active Loans Surge to $13.3 Billion, Reaching Early 2022 Levels

Decentralized finance (DeFi) appears to be experiencing a resurgence, as key indicators such as active loans and total value locked (TVL) show significant growth from their 2023 lows.

In a recent post on X, crypto market analytics platform Token Terminal noted that active loans have climbed to approximately $13.3 billion, levels not seen since early 2022.

DeFi lending, which allows investors to lend their crypto holdings to borrowers in exchange for interest, is a crucial metric for assessing DeFi participation and overall market health.

DeFi Active Loans Plummeted After 2022 Crash

During the 2021 crypto bull run, DeFi active loans peaked at $22.2 billion, coinciding with Bitcoin and Ethereum nearing $69,000 and $4,800, respectively.

However, this figure plummeted to around $10 billion by March 2022 and further to $3.1 billion in January 2023.

The recent recovery in DeFi lending, as noted by Token Terminal, suggests a potential increase in leverage, which is often seen as a leading indicator of a bull market.

Since hitting its low last year, the sector has rebounded significantly, with active loans rising back to $13.3 billion.

Total value locked (TVL) in DeFi also suffered a dramatic decline last year, falling 80% from its November 2021 peak of $180 billion to approximately $37 billion by October 2023.

However, the sector has since seen a remarkable recovery of around 160%, with TVL now standing at roughly $96.5 billion, according to DefiLlama.

Furthermore, DeFi TVL doubled in the first half of 2024, peaking at $109 billion in June.

Leading the charts in terms of locked value is the liquid staking protocol Lido, with an impressive $38.7 billion locked on-chain.

Following closely behind are the staking ecosystem EigenLayer and the Aave protocol, with over $11 billion locked in each, respectively.

Likewise, Taiki Maeda, founder of Humble Farmer Academy, has claimed that we might be entering a “DeFi renaissance” after more than four years of underperformance.

He specifically pointed to the DeFi lending platform Aave, which he believes is “poised to outperform” due to the increasing supply of its native stablecoin GHO and the Aave DAO’s initiatives to lower costs and introduce new revenue streams.

DeFi Tokens Remain in Bear Market Territory

Despite the recent positive trends, the majority of DeFi-related tokens remain in bear market territory.

According to CoinGecko, DeFi assets hold a market capitalization share of just 3.4%.

Native tokens for prominent DeFi platforms such as Aave, Curve Finance (CRV), and Uniswap are still down more than 80% from their all-time highs, even though the broader crypto market is down just 22% from its 2021 peak.

The achievement comes despite Ethereum’s recent high-profile launch of spot Ether exchange-traded funds (ETFs) in the United States, which drove an impressive $2.2 billion in inflows.