American banking giant JPMorgan has spread optimism in the decentralized finance (DeFi) and non-fungible tokens (NFT) sectors.
A report from JPMorgan released on Thursday shows a notable resurgence in DeFi and NFT activity, spurred by improving sentiment in crypto markets. Titled “Resurgence in DeFi and NFTs: A Market Shift,” the study attributes the revival to recent expectations for the US Bitcoin ETF.
The report emphasized that the recovery in the DeFi and NFT markets, although positive recently, are only “tepid signs of revival.”
“While there is no doubt that the recent resurgence in DeFi/NFT activity is a positive sign, it is too early to get excited about it.”
A team of analysts led by Nikolaos Panigirtzoglou noted that the rise comes almost two years after the market fell. “This provides optimism that the worst may be behind us when it comes to the medium-term trajectory of DeFi/NFT activity.”
Increased trading activity on decentralized exchanges
The analysts further write that some recovery in DeFi is “natural” given the increasing trading activity on decentralized exchanges (DEX).
DEXs are becoming increasingly popular in the crypto world as they prioritize user control, privacy and security. According to DefiLlama, trading volume on DEXs increased to $133.1 billion in March 2023, the third consecutive monthly increase.
In addition, Lido’s liquid staking has also contributed to the improvement of DeFi since the beginning of 2023, according to the JPMorgan report. Lido’s Liquid Staking (LDO) solution for Ethereum allows users to earn staking rewards without locking assets.
Analysts also pointed to Ether (ETH), which has underperformed other cryptocurrencies, impacting the total value of assets locked (TVL) measurement. This “would mechanically show some resurgence, as the price of several smaller cryptocurrencies has risen more than Ether in recent months,” they added.
However, the emergence of new blockchains, DeFi protocols and NFT platforms is seen as encouraging, the bank said. The Ethereum blockchain is still struggling with issues such as “network scalability, slow transaction speeds, and higher fees” despite the rise of DeFi.