How DeFi adoption varies across chains, BTC price affects velocity How DeFi adoption varies across chains, BTC price affects velocity

How DeFi adoption varies across chains, BTC price affects velocity

Exploring the intriguing journey of DeFi - from its summer bloom to navigating the bear market's murky waters.

How DeFi adoption varies across chains, BTC price affects velocity

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

The ‘DeFi Summer’ of 2020 was a turning point in the blockchain industry, as the season saw the debut of several DeFi projects, signaling the dawn of a new era in finance.

DeFi’s evolution during this period didn’t just make waves; it catalyzed a paradigm shift, positioning itself as the bold trailblazer of this unprecedented movement.

Yet, what does the momentum that the industry felt in 2020 look like in terms of hard data?

Today, with token prices down up to 90% as we navigate the murky waters of the current bear market, we look at the velocity of DeFi adoption and the impact of market cycles on adoption.

DeFi TVL analysis by chain since 2017

Against this backdrop, our analysis focuses on data collected from 2018 to 2023, with an emphasis on adoption across chains such as Ethereum, Tron, BNB Chain (BSC), Arbitrum, Polygon, Optimism, Avalanche, Mixin, Pulse, Cronos, Solana, Cardano, and Osmosis.

defi tvl
Source: DefiLlama

The table below shows the chains analyzed, the date the chain reached its all-time high for TVL (as tracked by DefiLlama,), the time it took to get its all-time high since launch (velocity), its all-time high (ATH), and the current TVL.

ChainActivity start*ATH Dateย ATH TVLVelocityCurrent TVL
EthereumNovember 2017**November 2021$108.92B1280 days$25.73B
TronAugust 2020November 2021$6.74B470 days$5.69B
BSCOctober 2020May 2021$21.94B186 days$3.36B
ArbitrumAugust 2021May 2023$2.53B614 days$2.12B
PolygonOctober 2020June 2021$9.89B249 days$0.97B
OptimismJuly 2021August 2022$1.15B393 days$0.92B
AvalancheFebruary 2021December 2021$11.41B302 days$0.66B
MixinDecember 2021June 2022$0.59B182 days$0.44B
PulseMay 2023May 2023$0.49B5 days$0.34B
CronosNovember 2021April 2022$3.22B145 days$0.32B
SolanaMarch 2021November 2021$10.03B236 days$0.31B
CardanoJanuary 2022March 2022$0.33B81 days$0.18B
OsmosisJune 2021March 2022$1.83B253 days$0.13B

The chart below visualizes the velocity of each chain in reaching its all-time high in TVL. The DeFi pioneer, Ethereum, has technically had DeFi activity since 2017, and thus it stands out as the slowest adoption, given its all-time high was not reached until Nov. 2021.

Interestingly, November 2021 coincides with the all-time high for Bitcoin and likely impacted DeFi on Tron and Solana, which also saw peaks at this time.

defi tvl
Source Data: DefiLlama**

Bitcoin adjusted velocity

As Bitcoin is seen as a barometer for the overall health of the cryptocurrency market, the velocity of DeFi adoption was adjusted based on Bitcoin’s price at each chain’s DeFi launch.

CryptoSlate cross-referenced the price of Bitcoin with the all-time high data to create a Bitcoin-adjusted velocity (BaV) for each chain.

The chart below’s grey line and plot points represent the BaV for each chain. The chart reveals that the DeFi ecosystems of Tron, Polygon, and BSC were all positively impacted by Bitcoin’s price and the supporting bullish sentiment of the market.

BTC adjusted defi
Source Data: DefiLlama***/ Yahoo Finance

Analysis of chain velocity

Ethereum was removed from the above chart for readability as it recorded a massive 7,936 velocity score compared to the next closes, with Tron at 1,065 and Arbitrum at 829.

With the bear market factored in, Pulse’s velocity reduced, giving it a score of just 10.98, as it reached its ATH in just 5 days. The next lowest was Cardano at 109, some ten times greater.

Using the BaV metric, it appears the best-performing chains were Pule, Cardano, Cronos, Solana, and Osmosis. While Ethereum, Tron, and Arbitrum stood out as having the slowest velocity.

Tron is one of the chains currently closest to its ATH, with a strong performance in 2023. Should it pass its ATH of $6.47 billion from its current level of $5.6 billion, it may surpass Ethereum on the BaV and standard measures of velocity.

tron tvl
Source: DefiLlama

The diverse trajectories of DeFi adoption across different blockchain networks underscore the importance of timing, market conditions, and the inherent advantages of being an early mover in the space. However, as the remarkable case of Pulse shows, even newcomers can achieve rapid growth with the right factors aligning.

Understanding the data

The speed at which you reach the all-time high in TVL is a complex metric. Some may argue that the faster you go up, the quicker you come down, and that is definitely the case for some chains.

However, the fundamental factors under analysis here concern momentum and adoption. Further, all the projects listed recorded at least $330 million locked, with most over $1 billion. These are not projects with low market cap and low liquidity.

The projects analyzed in this article are critical to identifying the strengths and weaknesses of the historical DeFi onboarding process. The average time it took for a chain to reach its ATH was around 338 days, meaning, outliers aside, most chains take almost a year to peak in DeFi activity.

* Launch date refers to the date of the first data tracked by DefiLama for each chain**
** Using MakerDAO’s DAI launch as the date for the Ethereum DeFi launch and data according to CoinmarketCap’s historical data.
*** Additional data included due to DefiLlama 2020 cut-off date.

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