DeFi
DeFi and NFT markets show signs of recovery, according to JPMorgan
Decentralized finance (DeFi) and non-fungible token (NFT) activity has picked up in recent months in anticipation of approval of a bitcoin spot listed in the United States (BTC) Exchange-traded funds (ETFs) have improved sentiment in crypto markets, JPMorgan (JPM) said in a research report on Thursday.
The increase follows nearly two years of downgrades, “thus creating some optimism that the worst may be behind us in terms of the medium-term trajectory of DeFi/NFT activity,” the report said.
“While we have no doubt that this recent upswing in DeFi/NFT activity is a positive sign, we believe it is too early to get excited about it,” wrote analysts led by Nikolaos Panigirtzoglou.
DeFi is an umbrella term used to refer to lending, trading, and other financial activities carried out on a blockchain. NFT are digital assets on a blockchain that represent ownership of virtual or physical objects and can be sold or traded
JPMorgan says some recovery in DeFi is to be expected given the increase in trading activity, some of which is executed on decentralized exchanges. Liquid staking by Pool is also partly responsible.
Furthermore, the ether (ETH) has underperformed other cryptocurrencies, so measuring total value locked (TVL) in terms of ETH would mechanically show some improvement as these other digital assets have gained more in recent months, the authors wrote.
Nonetheless, the rise of new DeFi chains and protocols such as Aptos, SUI, Pulsechain, Tenet, SEI and Celestia over the past year is encouraging, the bank said. NFTs have also benefited from the emergence of Bitcoin Ordinaries.
The Ethereum blockchain does not appear to have benefited from this recent upswing in DeFi and NFT activity, and is facing issues related to “the scalability of its network, low transaction speeds and higher fees”, as well as increased competition from others. layer-1 channels, according to the report.