- Total value locked in DeFi has risen sharply to over $100 billion, reversing a declining trend through most of 2022; growth is driven by launch of gmx.io on Arbitrum and increased activity on platforms like Curve and Convex Finance
- NFT monthly sales volumes picked up to over $1.4 billion in October across OpenSea, LooksRare etc, though still significantly below January 2022 peak; signals renewed retail interest in speculative crypto assets
- Primary driver cited is growing expectation that SEC will approve spot bitcoin ETF, which could spur crypto price spike similar to bitcoin futures ETF approval in 2021; FTX stabilization also restoring confidence
Recently, there have been tentative signs of revival in the decentralized finance (DeFi) and non-fungible token (NFT) markets, according to a new report from JPMorgan. The growth is being driven primarily by the expectation that the U.S. Securities and Exchange Commission (SEC) will approve a spot bitcoin exchange-traded fund (ETF).
DeFi Growth
The total value locked in DeFi has risen sharply to over $100 billion from around $60 billion at the start of October. In particular, there has been rapid growth on the Arbitrum and Optimism chains, which are Ethereum scaling solutions focused on lowering transaction costs.
The growth coincides with the launch of gmx.io, a popular DeFi trading platform, on Arbitrum in late September. There has also been an increase in activity and total value locked on Curve and Convex Finance.
According to JPMorgan, the recent growth reversed the declining trend in DeFi through most of 2022. The growth is a sign of renewed interest by retail investors.
NFT Volumes Rising
Similarly, NFT volumes have also picked up after months of decline. In October, monthly NFT sales rose to over $1.4 billion across major NFT marketplaces like OpenSea and LooksRare.
JPMorgan notes that the NFT market is still down significantly from its peak in January 2022. However, it believes that renewed interest in speculative assets like NFTs signals a shift in market sentiment for riskier investments.
Driving Factors
The report cites the growing expectation of U.S. approval for a spot bitcoin ETF as a primary reason behind the renewed interest. ProShares’ bitcoin futures ETF was approved in October 2021, leading to a spike in crypto asset prices.
Many investors anticipate a similar price impact if a spot bitcoin ETF is approved, which is driving increased risk appetite.
Additionally, the collapse of FTX has stabilized following a takeover by Binance, helping restore some confidence. The DeFi and NFT revival comes despite continued weakness in macroeconomic conditions.
Conclusion
While nascent, the growth in DeFi and NFT volumes points to improving sentiment and risk appetite among crypto investors. However, significant risks remain, and it is unclear whether the revival will be sustained if the anticipated spot bitcoin ETF approval fails to materialize. The crypto markets remain highly volatile.
