DeFi blue chip tokens, on average, doubled their trading volumes. Last week’s ETF approvals, which set up ETH tokens as a commodity, benefitted the list of top Ethereum protocols. DeFi has been growing in 2024, both for niche projects and top protocols.
DeFi blue chip tokens include Aave (AAVE), Maker (MKR), Uniswap (UNI), Curve Finance (CRV) and Compound (COMP). The top projects aggregate the most value while covering the most widely used business models in DeFi.
AAVE saw the biggest volume increase, expanding by 394% in the past few days. AAVE trading reached $188M. UNI expanded its trading volumes by about 230% this week, peaking at above $690M in 24 hours.
The core batch of DeFi blue chip tokens excludes the recent addition of re-staking protocols on Eigen Layer. The blue chips are still among the top apps as listed by DappRadar, although daily wallet-based activity fluctuates.
What Drives the DeFi Blue Chip Narrative?
DeFi blue chips are part of the bigger trend based on the Ethereum ecosystem. Other trending narratives include DEX, Liquidity Staking Derivatives, DEX, and Layer 2.
The DeFi narrative currently competes with several waves of meme tokens, which do not promise products or utility. However, DeFi narratives often go through cycles, returning as hot investments.
Also read: What’s The Main Challenge Holding DeFi Back? Liquidity
With DeFi blue chips, market returns vary, and being at the cycle’s peak means the trend may reverse soon. The DeFi blue chip narrative remains volatile and is vying with other allocations of funds. The biggest driver of the trend is the move of ETH close to $4,000, making protocols more secure and liquid.
Additionally, expectations of a renewed altcoin bull market boost older protocols with proven value. Meme token fatigue is rising, even with a new Meme 2.0 trend on the horizon.
Are DeFi Users Returning?
The DeFi trend is expressing itself in growing transaction volumes, value locked, and other proxy metrics.
The April market slump led to a lower user count, shrinking proper engagement with DeFi for the first time since October 2023. As of May 1, DeFi users reached 3.8M in a month, down from 6.3M in March, the peak month of the 2024 bull market.
The rise of blue chip DeFi tokens in May could increase user count.
As a proxy metric, DAI serves as an indicator for Maker-based activity. The native stablecoin of the protocol has 2.16K daily users, ranked 24th among the most widely transferred tokens. AAVE reports around 689 daily active users through TradingView data, while DappRadar marks 4.3K daily active wallets for AAVE V3.
The exact number of protocol end users, however, does not always affect the narratives and centralized trading. For that reason, the past week saw new inflows into blue chip tokens to tap the short-term price expansion.
Crypto Lending Shows Signs of Returning in May
After a month where DEX trading was the focus, another aspect of DeFi picked up – crypto lending. This type of protocol has suffered in bear markets, mostly due to the loss of collaterals during turbulent market times.
Now, both Aave and Curve Finance see borrowers and lenders return to gain liquidity rewards.
Curve Finance noted a significant trend reversal in May, where both supply and demand for loans grew by more than 200%. The Curve protocol rebuilt its collateral in a new expansion phase. Current loans are protected by $7.3M in wETH collaterals.
The other positive development in May was the lack of liquidations, especially due to sudden drops in ETH prices. One reason for the return to Curve Finance is a newly introduced algorithm of “soft liquidations”, which accommodates the collateral requirements instead of wiping out entire positions in one move.
Cryptopolitan reporting by Hristina Vasileva
