Ethereum poised for DeFi revival with lower fees and rate cuts by 2025
A recent report from Steno Research suggests that the decentralised finance (DeFi) market on Ethereum (CRYPTO:ETH) could experience a resurgence by 2025, four years after the notable DeFi summer of 2020.
This potential revival hinges on two critical factors: reduced Ethereum network fees and changes in U.S. interest rates.
Historically, Ethereum has led the DeFi market, with the highest total value locked (TVL) in its protocols compared to other smart contract blockchains.
Currently, Ethereum holds approximately $50.11 billion in TVL, far surpassing competitors like Tron and Solana.
For another DeFi wave to emerge, Steno Research emphasises the importance of making Ethereum-based protocols more accessible through lower network fees.
This could attract a broader range of participants, from large investors to smaller industry enthusiasts.
Another significant factor highlighted in the report is the potential impact of U.S. interest rate cuts.
The DeFi market, largely denominated in U.S. dollars, could see a boost in investor risk appetite if interest rates decrease.
Steno Research notes that the DeFi summer of 2020 was fueled in part by the Federal Reserve's interest rate cuts during the COVID-19 pandemic, which led to an all-time high TVL in 2021, peaking at over $175 billion.
As of 2024, high interest rates remain in place to combat inflation and influence currency values.
However, with signs of strain in the U.S. job market, the Federal Reserve may begin cutting interest rates as early as September.
This, combined with the growing demand for real-world assets (RWAs) like tokenised stocks and bonds, could set the stage for a DeFi revival.
Despite these promising indicators, the report cautions investors to remain vigilant about the risks associated with digital asset safety.
At the time of reporting, the Ethereum (ETH) price was $2,759.33.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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