DeFi market stages a comeback as derivatives surge

2024-08-23 07:17:34

Following a relatively modest 2023, the decentralized finance (DeFi) market experienced a remarkable resurgence during the first half of 2024.

As of Aug. 16, the total value locked (TVL) within the ecosystem stands at $82.67 billion, up from $54.4 billion at the beginning of the year — representing a robust growth of 51.9%.

One of the primary drivers behind this substantial uptick has been the growing adoption of onchain derivatives. In fact, since the beginning of the year, the average daily trading volume for crypto derivatives has skyrocketed from $1.8 billion in 2023 to $5 billion.

Ran Hammer, vice president of business development for Orbs, a layer-3 blockchain designed for onchain trading, attributes this growth to several factors.

He told Cointelegraph that the recent bull market and major improvements in user interface (UI) and user experience (UX), as well as lower latency and better tracking tools for copy trading and wallet monitoring, have helped create an ideal environment for leveraged trading.

The first half of the year not only witnessed increased volumes but also brought forth new innovations, such as pre-market crypto offerings, allowing investors to trade tokens before they are officially launched or publicly released.

Increased competition is fueling the derivatives market

The growth in onchain derivatives this year seems to have been propelled by intensifying competition from new market entrants as well as a resurgence in volume among established players.

Derivatives platforms by percentage volume market share. Source: Binance Research

While dYdX remained the clear market leader for most of the first half of 2024, it faced growing competition from emerging protocols such as SynFutures, Hyperliquid and RabbitX.

The latter three projects benefitted from the absence of native tokens, allowing their respective dev teams to focus solely on product development and user acquisition rather than managing elaborate token structures.

Hyperliquid — a layer-1 order book-based perpetual futures decentralized exchange (DEX) — performed particularly well. The platform’s daily trading volumes regularly exceeded $1 billion, overshadowing dYdX.

Its competitive edge seems to lie in its ability to match the performance of centralized exchanges (CEXs) with competitive fees while maintaining fully onchain operations.

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