DeFi TVL Doubled Since Q3, 2023, Exponential Report Says

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Written By Maya Cantina

Contents

  • Majority of LPs prefer conservative APYs, Exponential’s report says
  • DeFi lending on fire again; all eyes are on L2s

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The DeFi segment shows all the signs of a strong recovery after the “Crypto Winter.” Still, the lion’s share of investors are ready to lock their funds with mediocre APYs, a fresh report by Exponential says.

Majority of LPs prefer conservative APYs, Exponential’s report says

An overwhelming 75% of DeFi total value locked (TVL) is now in pools offering only 0-5% APY. Such a conservative allocation, particularly evident in Ethereum-based on-chain staking pools, signals a profound change in investor behavior.

Such calculations are shared by the State of DeFi 2024 report released by leading DeFi risk assessment platform Exponential. Seasoned asset management professionals indicated a number of trends that shaped the DeFi scene amid starting bullish rally.

At the same time, the very concept of DeFi and on-chain staking in particular are increasingly popular as of early 2024.

The TVL in yield-generating DeFi protocols has seen a steady climb from $26.5 billion in the third quarter of 2023 to $59.7 billion in the first quarter of 2024. This resurgence signals a return of confidence and liquidity to DeFi markets.

Experts added that, despite a natural decline in yields due to the increased participation of LPs, staking pools are now in charge of over 80% of aggregated DeFi TVL.

DeFi lending on fire again; all eyes are on L2s

Together with an overall upsurge, the DeFi lending sector is experiencing a revival, fueled by a collective risk-on attitude and an appetite for higher yields.

The utilization model of DeFi lending markets, where interest rates are pegged to borrowing demand, has seen stablecoin borrowing rates on platforms like Aave and Compound reach double digits, which is an obvious bullish shift from sub-5% rates on the bear market.

Also, the noncustodial bridging sector has witnessed a 51% TVL increase over the past year (from $94.8 million to $143.6 million), propelled by the accelerated adoption of ZK rollups on Ethereum (ETH).

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