DeFi Sector TVL Returns to Pre-FTX Crash Levels
The total value locked (TVL) across the entire DeFi sector has reached a new high for 2023 at $53 billion USD, marking the highest level since the FTX crash in November 2022.
DeFi Sector TVL Returns to Pre-FTX Crash Levels. Photo: CryptoSlate
According to data from DefiLlama, the TVL of all projects in the DeFi space has surged to $53 billion USD, a threshold not seen since the FTX crash in November 2022.
Specifically, from a TVL of $28 billion USD at the beginning of the year, the DeFi sector's locked value has increased by 36% to close 2023 at $53 billion USD. However, this figure is still less than a third of the $165 billion USD peak seen in April 2022, before the LUNA-UST crash shook the crypto market.
Fluctuations in DeFi TVL from mid-2022 to the end of 2023. Source: DefiLlama (30/12/2023)
Notably, the DeFi sector saw its strongest recovery in the final three months of the year, driven by the surge in the cryptocurrency market due to Bitcoin ETF momentum.
Additionally, significant developments across various protocols throughout 2023 are believed to have contributed to DeFi's rapid recovery.
Most notably, MakerDAO's Real World Asset (RWA) strategy converted $2.5 billion in collateral assets for the DAI stablecoin into US treasury bonds to attract more investors holding this stablecoin. Maker also launched the Spark Protocol, a lending protocol aimed at enhancing liquidity, making it the highest revenue-generating DeFi project of the year.
Similarly, Lido Finance gained prominence with the post-Shanghai Ethereum upgrade trend towards Liquid Staking in April 2023, now holding one-third of the total ETH staked. Lido currently leads DeFi protocols with over $21 billion USD in locked assets.
Top 10 DeFi projects by TVL. Source: DefiLlama (30/12/2023)
Leading DEX Uniswap announced version 4, featuring enhancements in trading processes and MEV (Miner Extractable Value) protection features.
However, risks threatening the stability of the DeFi sector throughout the year remained, notably including Curve Finance's exploit exposing the lending positions of its co-founder across multiple projects, alongside a series of hacks causing hundreds of millions in losses.
