Signs of Revival in DeFi and NFT Markets says J.P. Morgan

According to a recent research report by JPMorgan, the DeFi and NFT activity has seen a revival in recent months. The approval of a U.S.-listed spot bitcoin (BTC) exchange-traded fund (ETF) has improved sentiment in the crypto markets, which has led to an increase in DeFi and NFT activities. This comes after almost two years of downshifting, which has created optimism that the worst might be behind in terms of the medium-term trajectory for DeFi/NFT activity.

DeFi is an umbrella term for lending, trading, and other financial activities carried out on a blockchain. NFTs are digital assets that represent ownership of virtual or physical items and can be sold or traded. The report states that the recovery in DeFi is to be expected given the increased trading activity, some of which is executed on decentralized exchanges. Liquid staking by Lido is also partly responsible for the increase in DeFi activity.

The rise of new chains and DeFi protocols such as Aptos, SUI, Pulsechain, Tenet, SEI, and Celestia in the past year is encouraging, according to the bank. NFTs have also benefited from the emergence of Bitcoin ordinals. However, the Ethereum blockchain does not appear to have profited from this recent revival in DeFi and NFT activity. It faces issues related to its network scalability, low transaction speeds, and higher fees. Increased competition from other Layer-1 chains has also affected the Ethereum blockchain.

While the recent revival in DeFi and NFT activity is a positive sign, the report suggests that it is too early to be getting excited about it. The authors believe that measuring total value locked (TVL) in ETH terms would mechanically show some improvement, as other digital assets have gained more in recent months. Nonetheless, the increase in DeFi and NFT activity is a positive development for the crypto markets, and the rise of new chains and protocols is encouraging for the future of DeFi and NFT.