There Are Tentative Signs of Revival in DeFi and NFT Markets, JPMorgan Says

Expectation of U.S. approval of a spot bitcoin ETF has led to an increase in DeFi and NFT activity in recent months, the report said.

AccessTimeIconNov 30, 2023 at 4:23 p.m. UTC
Updated Jan 26, 2024 at 3:21 p.m. UTC
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Decentralized finance (DeFi) and non-fungible token (NFT) activity has revived in recent months as expectation of the approval of a U.S.-listed spot bitcoin (BTC) exchange-traded fund (ETF) improved sentiment in crypto markets, JPMorgan (JPM) said in a research report Thursday.

The increase follows almost two years of down-shifting, “thus creating some optimism that the worst might be behind us in terms of the medium-term trajectory for DeFi/NFT activity, “ the report said.

“While we do not doubt this recent revival in DeFi/NFT activity is a positive sign, we believe it is too early to be getting excited about it,” analysts led by Nikolaos Panigirtzoglou wrote.

DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain. NFTs are digital assets on a blockchain that represent ownership of virtual or physical items and can be sold or traded

JPMorgan says some recovery in DeFi is to be expected given the increased trading activity, some of which is executed on decentralized exchanges. Liquid staking by Lido is also partly responsible.

Additionally, ether (ETH) has underperformed other cryptocurrencies, so measuring total value locked (TVL) in ETH terms would mechanically show some improvement, as these other digital assets have gained more in recent months, the authors wrote.

Still, the rise of new chains and DeFi protocols such as Aptos, SUI, Pulsechain, Tenet, SEI and Celestia in the past year is encouraging, the bank said. NFTs have also benefited from the emergence of Bitcoin ordinals.

The Ethereum blockchain does not appear to have profited from this recent revival in DeFi and NFT activity, and faces issues related to its “network scalability, low transaction speeds and higher fees,” and increased competition from other layer-1 chains, the report said.

Edited by Sheldon Reback.

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Will Canny is CoinDesk's finance reporter.


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