DeFi and NFT Markets Show Signs of Recovery, Says JPMorgan

Tentative revival in DeFi and NFT activity linked to improved crypto market sentiment.

American banking behemoth JPMorgan has expressed optimism about the resurgence in the decentralized finance (DeFi) and non-fungible tokens (NFT) sectors.

A report released by JPMorgan on Thursday indicates a significant revival in DeFi and NFT activity, driven by a renewed sentiment in the crypto markets. The study, titled ‘Resurgence in DeFi and NFTs: A Market Shift,’ links this resurgence to the anticipation of a US Bitcoin ETF.

The report, led by a team of analysts including Nikolaos Panigirtzoglou, notes that this increase comes after nearly two years of market decline, sparking optimism that the worst may be over for DeFi/NFT activity in the medium term.

The analysts suggest that the recovery in DeFi is “natural,” given the rise in trading activity on decentralized exchanges (DEXs). DEXs, known for their emphasis on user control, privacy, and security, are gaining traction in the crypto world. As per DefiLlama, trading volume on DEXs increased to $133.1 billion in March 2023, marking the third consecutive monthly increase.

However, while the report acknowledges the recent recovery in the DeFi and NFT markets, it emphasizes that these are merely “tentative signs of revival.” The report states, “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.”

The report also highlights the role of Lido’s liquid staking in improving DeFi since early 2023. Lido (LDO), a liquid staking solution for Ethereum, allows users to earn staking rewards without locking their assets.

The analysts point out that Ether (ETH), which has underperformed other cryptos, has impacted the total value locked (TVL) measurement. They suggest that this “would mechanically show some revival given the price of several smaller cryptocurrencies has risen by more than ether in recent months.”

Despite the challenges faced by the Ethereum blockchain, such as “network scalability, low transaction speeds, and higher fees,” the emergence of new blockchains, DeFi protocols, and NFT platforms is seen as encouraging by the bank.