Welcome to a new series of articles where we will cover the weekly movements of the Decentralized Finance (DeFi) sector of the cryptocurrency economic landscape, as it has become a very important part of the whole market, surpassing a total worth of $600 million, and offering services similar to banking to crypto users and enthusiasts, offering loans, derivatives, asset tokenization and payment services.
As the world becomes more aware of cryptocurrency, given how much damage traditional stock markets (and economies in general) have taken due to world events like the U.S.-Iran conflict earlier this year and the massive spread of Covid-19 as the time of writing, the kind of alternatives that DeFi presents to less-knowledgeable potential users might also work as an entry point for those that are more cautious with their investments, so we at Mobileyourlife believe that it would be a great time to start focusing on the behavior of this sector instead of covering mostly volatile tokens that raise a little bit of money in a certain week. And with that, let’s go right ahead:
How To Measure DeFi?
To get a proper grip on the scale and behavior of DeFi, it is simply not enough to look at the best projects and how their tokens move, since the projects are aimed at handling, saving and loaning larger quantities for their users by using their tokens as collaterals.
Because of this, DeFi Pulse created the Total Value Locked measure (TVL), which calculates the entire value of the DeFi market by taking into account all the Ether and ERC-20 tokens that are held in smart contracts among the different projects, and then multiplying the values by the value of each token in USD. This not only makes it a measure on how the most important tokens are moving, but also how much money the users are storing and transacting through the platforms.
As you can see, the DeFi market has not seen drastic movements in the past week (except for a potentially erroneous downspike on March 23rd), but going back a few more weeks we can see a downward slope between the 11th and the 13th, which is the same period where cryptocurrency in general lost nearly $100 billion. This means that the DeFi market is not invulnerable to big variations in the crypto market, but it does show that it has a certain tendency towards stability in regular conditions.
Each week we will be looking at the movement of the TVL for the DeFi market and relate any big movements to the recent news, so stay tuned!