DeFi Shined in a Mad, Mad, Mad, Mad Year in Crypto Markets

The cryptocurrency market has recently created a unique standard for wealth creation, volatility as well as sheer craziness. Observers watched in awe at the market capitalization of cryptocurrency surpassing $3 trillion. Observers were also equally surprised to see doggy tokens, gaming tokens, and joke tokens pique investors’ interest. An unforgettable moment of the year was Elon Musk’s single amusing tweet that created and vapourized billions worth of USD. However, behind the chaos, a logical story emerged, and everything was about DeFi. When Ethereum and its ecosystem(s) showed their utility and flexibility within a year’s time, the sector’s market value increased by over 600 percent to $163 billion, while TVL (Total Value Locked) increased to $245 billion by 12 times.

Looking at some of the figures from a year ago. ETH was only $738 on January 1, 2021, in comparison to $4,091, the current price. Uniswap’s market valuation was $1 billion a year ago, and it’s now over $9 billion. A blockchain game, Axie Infinity, became a top favorite in the market in the summer of this year, thanks to AXS, its token, which increased in value by over 170 times. It brought forth a brand-new crypto category: GameFi.

Long-standing blue-chips Aave, Uniswap, Curve, Compound, and MakerDAO, consolidated their DeFi dominance, with a share of 29.4 percent of Total Value Locked and 10.4 percent of market valuation. Meanwhile, newcomers like Abracadabra, Convex Finance, OlympusDAOhave established themselves as leaders.

Even as Ethereum’s soaring costs and use muddled the picture for some investors, Layer 1s adopted EVM compatibility in an effort to attract DeFi Total Value Locked. Binance Smart Chain, Avalanche, Solana, and Terra all gained considerable market share and established a cross-chain ecosystem in the latter part of 2021, and this became a prominent topic.

It didn’t have to end up this way. With a huge overhang, the crypto markets began 2021 with a significant overhang. The Coronavirus outbreak shook the global economy, and the unpredictable U.S. presidential election contributed to the market’s turmoil. Institutional investors, on the other hand, began to collect BTC as interest in Bitcoin as a non-correlated store of value developed, and there was speculation that Bitcoin’s third block reward halving would significantly limit new supply production and usher in a new market cycle.

The Chicago Mercantile Exchange’s introduction of Ether futures contracts piqued Wall Street’s curiosity. Then Tesla invested $1.5 billion in Bitcoin and declared that it would be accepting it as the payment mode for purchasing electric vehicles, igniting a surge of investment in various institutions as well as pushing bitcoin closer to key investors. Furthermore, there was Dogecoin, which had a lighthearted speculative frenzy in May, skyrocketing 173 percent in two weeks.

The NFT craze quickly surpassed Dogecoin. The use-case for blockchain-powered collectibles was demonstrated by Dapper Labs’ NBA Top Shot, and in the month of March, a reputed digital artist named Beeple startled the art domain by selling his creative artworks, every day, for an astounding $69 million at Christie’s, which is the respected auction house. It is one of the expensive pieces of artwork painted by a living artist which is going to be sold. Despite the sneering of the intellectuals, it piqued the interest of aspiring artists as well as collectors. Snoop Dogg, Katy Perry, Ice Cube, and Melania Trump were among the celebs that spoke with The Defiant’s Robin Schmidt on their experiences with the medium.

After peaking in July, however, the Polygon network lost market share. As traders speculated on low-cost scalable Layer 1s supporting EVM compatibility, Solana, Terra, and Avalanche emerged as serious challenges to Binance Smart Chain’s position as the second-largest chain by DeFi TVL in the third quarter. After entering the third quarter with $631 million, $3.34 million, and $189 million, respectively, Solana, Terra, and Avalanche all have TVL of over $10 billion in recent months.

Everything went downward in December, with Bitcoin and Ethereum falling more than 30% from their record highs. Despite this, many traders anticipate the slump will end soon. The Eth2 chain merging is on the way, and Polkadot’s upcoming parachain ecosystem is also considered as a fundamental trigger that might re-energize the markets.

Roxanne Williams

Roxanne Williams has recently joined as a market reporter for CryptoNewsZ - the 24/7 crypto news site, where she produces recent stories, technical analysis and price updates on world's leading cryptocurrencies.

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