The decentralized finance (DeFi) sector is gearing up for a resurgence, with the total value locked (TVL) across the crypto ecosystem potentially reaching new all-time highs in the first half of 2025, according to a report by Steno Research published on Friday. Despite current TVL levels remaining below their 2021 peak, analysts expect a significant revival driven by several key factors.
The report highlights the influence of U.S. interest rates on the DeFi market, which remains largely dollar-centric. “Interest rates are the most critical factor influencing the appeal of DeFi, as they determine whether investors are more inclined to seek out higher-risk opportunities in decentralized financial markets,” said Mads Eberhardt, an analyst at Steno Research.
Steno Research draws parallels between the anticipated DeFi revival and the first “DeFi summer” in 2020, which followed the Federal Reserve’s interest-rate cuts in response to the COVID-19 pandemic. As interest rates decrease, DeFi’s appeal grows due to lower opportunity costs for holding stablecoins, which are essential to the functioning of many DeFi protocols.
Beyond interest rates, the report identifies crypto-native factors driving the DeFi comeback. The supply of stablecoins, which has grown by approximately $40 billion since January 2024, plays a pivotal role in the ecosystem. “Stablecoins are the backbone of DeFi protocols,” the report notes, underscoring their importance in the sector’s recovery.
Additionally, the growing demand for real-world assets (RWAs), such as tokenized stocks, bonds, and commodities, has been another driving force behind DeFi’s growth. With a 50% increase in these assets year-to-date, Steno Research points to a rising interest in on-chain financial products that could further fuel the sector’s expansion.
The report also highlights the impact of reduced fees on the Ethereum network, the primary blockchain used for DeFi. Lower transaction costs make DeFi more accessible, providing an added boost to the sector’s potential revival.
As the broader macroeconomic landscape evolves and the crypto space continues to mature, the anticipated return of DeFi summer could mark a significant chapter in the growth and development of decentralized finance.
