Analysts at Bernstein anticipate a rapid recovery in the DeFi sector, driven by the rise of Bitcoin and a significant influx of capital into spot ETFs, reports The Block.
According to the analysts, the decentralized finance sector was “completely destroyed” during the previous market cycle, characterized by “unsustainable yields” due to inflationary token incentive programs. This model eventually collapsed.
As a notable example, experts cited the collapse of the Terra ecosystem in May 2022. Before its downfall, the DeFi project Anchor offered a 20% yield on the TerraUSD (UST) algorithmic stablecoin, based on the governance token Luna. The platform’s collapse resulted in investors losing about $40 billion.
In the current market cycle, “yields are real,” the experts assert. They believe the segment’s resilience is underpinned by key dapps like Uniswap. In February, the non-profit organization associated with the DEX proposed distributing protocol fees among UNI holders, positively impacting the platform’s native token price.
“The largest decentralized spot exchange generated $2 billion in trading volume over the past 24 hours — more than 50% of Coinbase’s turnover,” researchers at The Block observed.
According to their data, Uniswap is the largest DeFi protocol by fee generation, approximately $3.7 million per day.
Bernstein suggests that the leading DEX’s experiment with democratizing monetary policy could serve as a model for other projects.
Experts expressed confidence that regulators will “change their narratives” regarding tokens, which are often attributed with securities-like properties.
“With future regulatory clarity, we wouldn’t be surprised if global asset managers move towards a potential DeFi-ETF,” added Bernstein analysts.
Assets related to decentralized finance account for 15% of the company’s portfolio. Since the beginning of the year, their value has also increased by 15%, the experts noted.
At the time of writing, the total TVL in the DeFi sector is $99.65 billion.
At the peak of the previous market cycle, the figure exceeded $180 billion.
In March, Bitcoin’s price reached a historic high above $69,000.