Decentralized finance (DeFi) offers numerous financial applications associated with the cryptocurrency sector. Within this ecosystem, the lending market has just reached a new historic high of over $130 billion.
The TVL of the lending market explodes beyond $130 billion
Since its real boom at the end of 2020, decentralized finance (DeFi) has established itself as an ecosystem capable of applying options and services inspired by traditional finance to the cryptocurrency sector. This ecosystem is largely based on Ethereum ($129 billion) and currently has a total value locked (TVL) of $208 billion.
One of the most popular sectors is Liquid Staking, with a TVL currently estimated at just over $84 billion. This option is highly appreciated by Ether (ETH) holders seeking returns on their staking positions, using the famous liquid staking tokens (LST).
However, the surprise comes from elsewhere at the beginning of September. More specifically, it is the lending market (loans and borrowings) that has just taken center stage, following a spectacular increase in its TVL, now positioned above $130 billion.
This represents a 140% increase since the low point in April, when it stood at around $56 billion, making the lending market the best-performing sector in DeFi at present. How can this momentum be explained?
A market largely dominated by the Aave protocol
Faced with this significant increase in liquidity locked in the lending market, analysts are trying to find explanations. Among those most often mentioned, four stand out in particular:
- The implementation of policies favorable to the cryptocurrency sector;
- The growing use of tokenized real-world assets (RWAs) as collateral;
- The increase in looping strategies that allow the same collateral to be used multiple times;
- The accelerated growth of the stablecoin market.
In this field, three protocols are particularly successful. The top position is largely occupied by Aave (present on 18 blockchains), which alone accounts for almost $70 billion in TVL, representing a market share of 54%. Next comes—but quite far behind—the Morpho protocol (present on 22 blockchains), estimated at $12.6 billion, and finally SparkLend (present on two blockchains), which has a TVL of $7.6 billion.
Could the current interest in the lending market be a sign of a strong comeback for DeFi, driven by the adoption of its financial services by traditional financial players eager to position themselves in anticipation of an announced regulatory opening? In any case, the rise in its TVL appears to be well underway.
