The Crypto Market Shifts Toward DeFi

The crypto market’s latest drawdown has seen demand shifting toward decentralized apps. The renewed interest in DeFi is boosting some of the hot lending protocols.

DeFi Protocols Show Gains

DeFi is the next narrative heating up, as meme tokens and Pump.fun lost mindshare. Top DeFi protocols are seeing an inflow of fees in the past week, signaling increased usage. The DeFi space also received a boost from the recent end of the US Securities and Exchange Commission case against Uniswap, paving the way for further decentralized innovation.

While some lending protocols witnessed outflows of value locked, other apps had more active inflows. Top earners briefly included Ondo Finance and Franklin Templeton, indicating demand for Real World Asset (RWA) tokenization.

DeFi Saver and Ethena experienced peak revenues despite market turbulence. DeFi Saver was a leader in 7-day revenues, playing a crucial role in preventing liquidations. After Ethereum (ETH) dropped below $2,400, DeFi loans faced liquidation risks without automated position protections. DeFi Saver’s role was vital in averting contagion and liquidation cascades after the market drawdown.

According to TokenTerminal, DeFi Saver excelled in terms of revenues and retained earnings. Ethena (ENA) exhibited significant earnings growth over the past week, managing to survive the Bybit hack without contagion, as its collateral was secured with the Copper custodian.

Ethena derives its fees from Ethereum trade funding but faced potential challenges regarding its USDe peg during market turbulence. However, the latest market fluctuations did not cause a USDe de-peg or necessitate halting USDe-sUSDe trading, showcasing the protocol’s resilience amid market drawdowns.

The DeFi sector retains over $102B in total value locked, primarily relying on ETH and BTC as collateral. The influx of stablecoins has also elevated demand for passive income, given the lack of a liquid altcoin market that allows legacy assets to be used as collateral for stablecoin loans.

Growing Mindshare in February

DeFi has been expanding its mindshare since early February, overtaking the meme narrative on February 7 and continuing to grow against the AI narrative. The last time DeFi surpassed meme tokens was in June 2024 during the previous bull cycle, as per Kaito’s data.

Despite market drawdowns, DeFi has proven to be a resilient development in the crypto space. Following the short-lived rally of memes and AI agents, DeFi remains the foundation for liquidity allocation, stablecoin availability, and DEX swaps.

> The trend continues.
> Market down, DeFi mindshare up.
> — Kaito AI 🌊 (@KaitoAI) February 25, 2025

As noted by Kaito, DeFi emerged as the second-largest narrative in February, still trailing behind the general AI discussion. However, AI’s presence on social media reflects the number of agents available, while some DeFi protocols effectively attracted liquidity.

In the past week, while all narrative tokens slowed down and experienced losses, DeFi 1.0 and DeFi 2.0 protocols managed to limit those losses to around 10%.

The DeFi token sector remains valued at over $102B, significantly outperforming meme tokens. Despite market pressures, some DeFi tokens enjoyed short-term rallies. Maker (MKR) emerged as a top gainer, rising over 42% in a week to $1,688.52, bolstered by RWA tokenization. ThorChain (RUNE) also gained traction, increasing over 31% in the same timeframe, trading at $1.56, despite its use in laundering funds from the Bybit hack.