Decentralized finance (DeFi) and non-fungible token (NFT) activity has reignited in recent months as anticipation of the approval of a US-listed Bitcoin [BTC] exchange-traded fund (ETF) US improved sentiment in crypto markets, JPMorgan (JPM) said in a research report.
The increase follows nearly two years of decline, “thus creating some optimism that the worst may be behind us in terms of the medium-term trajectory of DeFi/NFT activity,” according to the report.
“While we do not doubt that this recent revival of DeFi/NFT activity is a positive sign, we believe it is too early to get excited about it,” wrote analysts led by Nikolaos Panigirtzoglou.
DeFi is a general term used for loans, transactions, 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 exchanged.
JPMorgan says some recovery is expected in DeFi given increased trading activity, some of which is executed on decentralized exchanges. Lido’s liquid bet is also partly responsible.
Additionally, ether [ETH] has underperformed other cryptocurrencies, so measuring total value locked (TVL) in terms of ETH would mechanically show some improvement as these other digital assets have gained more in recent months. , the authors wrote.
Still, the rise of new DeFi chains and 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 benefited from this recent resurgence in DeFi and NFT activity, and is facing issues related to its “network scalability, low transaction speeds and higher fees” and increased competition from other Layer 1 chains. , according to the report.