- Macroeconomic Factors
- Infrastructure and UX Improvements
- Key Protocols
Apollo Crypto, an investment management firm specializing in digital assets, has released a report highlighting the potential for a second wave of growth in decentralized finance (DeFi). Following the peak of “DeFi Summer” in 2020 and subsequent market slowdown, the report notes that protocols like Maker, Uniswap, and Aave have emerged as industry staples.
Macroeconomic Factors
The Apollo Crypto report identifies macroeconomic factors, such as the United States Federal Reserve’s recent interest rate cut and China’s credit expansion, as key drivers behind DeFi growth.
The Fed’s rate cut has created a more attractive option for risk-on assets, including cryptocurrencies like Bitcoin and Ether.
Moreover, the People’s Bank of China (PBOC) decided to reduce short-term interest rates and establish supportive lending measures. Historically, the performance of Bitcoin has been positively correlated with the PBOC’s total asset growth, proving to be another possible bullish catalyst.
Infrastructure and UX Improvements
The report also mentions DeFi infrastructure development. Over the past few years, the crypto environment has focused on building infrastructure to provide an abundance of cheap block space.
This has allowed decentralized applications (DApps) to access block space with more performant speeds and lower transaction costs on layer-2 scaling solutions. Apollo Crypto points to Coinbase’s cbBTC, a tokenized version of BTC, as a potential major source of capital for the DeFi industry.
Key Protocols
According to the report, Aave remains a leading decentralized lending platform, while Uniswap holds its position as the highest-volume decentralized exchange. Maker also retains its role as a catalyst in the DeFi resurgence, despite its recent rebranding to the Sky ecosystem.
Sky’s new stablecoin, USDS, faced criticism over the presence of a freeze function. However, Cinneamhain Ventures partner Adam Cochran deemed this function necessary for T-bill support.
The Apollo Crypto report underscores the potential for a second wave of DeFi growth driven by macroeconomic factors and infrastructure improvements. With key protocols like Aave and Uniswap and new initiatives like Coinbase’s cbBTC, the DeFi sector is poised for further development and expansion.
