Is 2022 going to be DeFi’s boom year?

This month, prominent DeFi projects have shown a strong recovery after January’s slump. According to Coingecko,, “The combined capitalization of DeFi tokens sits at $121B, having bounced 16.7% since posing a local low of $103.7B on 3rd February.”

As an example, Terra (LUNA) has jumped 7% in the last week, and is the sector’s top token with a market cap of $23.5B. Furthermore, the sector’s combined TVL is up 11.5% since February began according to DeFi Llama, and is currently at $221B. 

Despite this, Ethereum’s network activity is slower. The Defiant says, “The weekly burn rate dropped to roughly 7 ETH every minute from 8.34 ETH, and is down nearly 42% in the past month. OpenSea, a favoured NFT marketplace, was the largest source of burnt ETH, with 12,384 ETH wiped from circulation so far in February. 

Analysts predict excellent year for DeFi

Some analysts are predicting that DeFi will take centre stage in the crypto world this year. And, according to Gunnar Jaerv, the COO of digital asset services firm First Digital Trust, traditional financial institutions will drive growth for DeFi this year. Jaerv observed that the sector has matured, providing the basis for a strong appetite for it. He also added his own explanation for that: “If you look at what’s happening around up today. It’s actually largely commercial. It’s Enterprise.”

A Consensys report published on 1st February also noted that the total number of unique DeFi addresses had produced steady growth amid the market downturn. It commented that the data was “a worthy pulse on the overall health of the DeFi ecosystem, suggesting price action would begin to recover should unique addresses continue to grow.”

A few days earlier, Huobi published a report offering a view on the idea that institutions will drive DeFi growth. It predicts institutions will converge on protocols offering under-collateralized lending solutions. Huobi also anticipates the recent growth in the low-cost Layer 1 and cross-chain dapps will accelerate during 2022.

Some analysts see challenges

Those who think DeFi will face challenges this year include JP Morgan. A report published 3rd February predicts DeFi will soon face a regulatory reckoning. It says: “the governance tokens of leading protocols including Uniswap, Synthetic, and Compound constitute unregulated “pseudo-equities” that “provide token holders with claims on future cash flows generated on DeFi protocols.” Michael Cembalest — JP Morgan’s chairman of market and investment strategy commented, “These are not registered as securities even though they sure act like them.”

As ever, it’s a question of whom to believe.

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