JPMorgan Spots Revival Signs in DeFi and NFT Markets

• Resurgence in Decentralized Finance and Non-Fungible Tokens
• A Two-Year Lull Ended
• A Word of Caution
• Defining DeFi and NFTs
• Factors Contributing to the DeFi Recovery
• Emerging Chains and Protocols
• Ethereum's Challenges
• Additional Reading

Resurgence in Decentralized Finance and Non-Fungible Tokens

A revival in the activities related to decentralized finance (DeFi) and non-fungible tokens (NFT) has been observed over recent months. This resurgence comes with a boost in optimism towards the approval of a U.S.-listed spot bitcoin (BTC) exchange-traded fund (ETF), which has improved sentiment in crypto markets, according to a research report released by JPMorgan (JPM) recently.

A Two-Year Lull Ended

Following nearly two years of decreased activity, the report suggests a renewal of optimism that the deepest part of the downturn may have passed concerning the mid-term trajectory for DeFi/NFT activity.

A Word of Caution

Despite the report affirming that the recent revival in DeFi/NFT activity is a positive development, analysts led by Nikolaos Panigirtzoglou advise that it may be too early for any significant excitement.

Defining DeFi and NFTs

DeFi is a broad term encompassing lending, trading, and other financial activities performed on a blockchain. On the other hand, NFTs are digital assets on a blockchain that symbolize ownership of both virtual and physical items and can be traded or sold.

Factors Contributing to the DeFi Recovery

JPMorgan points out that some recovery in DeFi is to be anticipated given the increased trading activity, a portion of which is performed on decentralized exchanges. The report also states that liquid staking by Lido has partly contributed to this recovery.

Simultaneously, ether (ETH) has lagged behind other cryptocurrencies. Thus, measuring the total value locked (TVL) in ETH terms would naturally display some improvement, as these other digital assets have appreciated more in recent months.

Emerging Chains and Protocols

The report also highlights the promising rise of new chains and DeFi protocols such as Aptos, SUI, Pulsechain, Tenet, SEI, and Celestia over the past year. Further, NFTs have gained from the emergence of Bitcoin$42,260 -0.64% ordinals.

Ethereum's Challenges

Despite these positive developments, the Ethereum$2,315 -2.42% blockchain does not seem to have benefited from this recent DeFi and NFT activity revival. The report cites issues related to network scalability, slow transaction speeds, higher fees, and increased competition from other layer-1 chains as significant challenges.

Additional Reading

For more insights, read the article titled Grayscale Bitcoin Trust Could See $2.7B of Outflows if ETF Conversion is Approved: JPMorgan.

Edited by Jonathan Stoker