Decentralized finance (DeFi) is experiencing a notable resurgence, now ranking third in popularity behind AI and Memes. According to a recent Steno Research report, DeFi is on track for a significant rebound, with the total value locked (TVL) in the crypto space expected to hit an all-time high in the first half of next year.
It seems a DeFi revival is on the horizon.
Key Factors Behind DeFi’s Revival
Lower Interest Rates
Steno Research highlights that falling interest rates, especially in the U.S., are crucial for DeFi’s appeal. Lower rates tend to push investors towards higher-risk opportunities in decentralized finance, similar to the conditions seen during the first DeFi summer in 2020, which followed Federal Reserve rate cuts during the Covid pandemic.
Rise of Stablecoins
The increase in stablecoins, which have grown by about $40 billion since January, is a major boost for DeFi. Stablecoins are essential for DeFi protocols, and lower interest rates make holding them more attractive.
Real-World Assets
The routes of the revival of DeFi will pass through Institutional DeFi, propelled by RWA tokenization in the same fashion ETFs created the bull market in Bitcoin this year. The growth of real-world assets (RWAs), such as tokenized stocks and bonds, has surged by 50% this year. This reflects strong demand for on-chain financial products and contributes to DeFi’s resurgence.
Due to institutional liquidity, RWA tokens will soon be utilized for trading, hedging, lending, and borrowing worldwide as more real-world assets are tokenized on public networks.
Lower Ethereum Fees
Decreased transaction fees on the Ethereum network, the main blockchain for DeFi, further enhance the appeal and accessibility of decentralized finance. Many analysts believe that a significant drop in Ethereum’s gas fees often signals a potential price bottom.
Top Defi Tokens to Watch
The top 3 DeFi crypto tokens that have the potential to outperform top altcoins during the upcoming bull run.
Stacks
Stacks (STX) is on a roll, up 9.44% in the past day and 12.53% over the week. It’s gearing up to test resistance at $1.675. Both MACD and RSI indicate strong bullish sentiment. If the trend persists, STX could aim for $2.135. However, a reversal might pull it back to $1.230.
AAVE
Over the past week, AAVE, a top 50 DeFi token has risen 25%, shattering an almost two-year accumulation range. Whales still buy AAVE, with on-chain data revealing more purchasing pressure than selling on decentralized exchanges. AAVE may rise to $170.
Maker
Maker is a popular decentralized exchange and stablecoin project. Maker (MKR) climbed 5% in 24 hours to $1.883 billion of market cap and ranked 46th. Key indicators like MACD are increasing bullishly with a 22.89% YTD gain. The bullish trend might push MKR to $2,630. It may fall to $1,700 otherwise.
Overall, with these factors in play, DeFi could reach new highs by mid-2024. Since its bottom in August, it has gone up 83%, and currently trading at $0.02355.
Also Check Out: Top Altcoins To Stack Before The Crypto Bull Run!
With so much potential, what are the biggest challenges facing DeFi’s growth?
Source: https://coinpedia.org/news/why-defi-could-be-your-best-investment-in-2024-insider-insights-revealed/