DeFi is a rapidly evolving space that has seen tremendous growth since its inception. One key metric used to measure the health and growth of the DeFi market is Total Value Locked (TVL), which represents the total value of all assets locked into various DeFi protocols.
Careful out there guys. Very little behind this rally. It is highly likely to fail. TVL flows are very weak.
See on the chart what has happened to each of the past bear market rallies without TVL backing…
So what can we expect to see when the bottom is forming? 🧵 1/5 pic.twitter.com/A9tnECbf8f
— Pendulum Flow (@PendulumFlow) January 20, 2023
Historically, DeFi TVL has tended to increase as the price of Bitcoin (BTC) and other cryptocurrencies rally. However, a recent tweet by a popular crypto analyst, Pendulum Flow, has raised concerns about the current state of the DeFi market. The tweet in question points out that while BTC prices are up, DeFi TVL is almost flat, casting doubt on the strength of the current crypto rally and thus posing the question of whether this is a manipulated bull trap or an organic rally.
The relationship between DeFi TVL and the broader crypto market is complex, and there are several factors that could be contributing to the current situation. One possible explanation is that investors are becoming more cautious and selective in their investments, focusing on more established and proven DeFi protocols rather than newer and riskier projects.
Another possible explanation for the flat DeFi TVL is that the current crypto rally is driven primarily by institutional investors, who may be less interested in DeFi than retail investors. Institutional investors tend to focus on larger, more established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) rather than newer, more experimental DeFi projects. This could also signify a maturing market as institutional investors start to play a bigger role in the crypto space.
Whatever the cause of the flat DeFi TVL, it’s clear that the current crypto rally is not as broad-based as some might have hoped. While the price of Bitcoin and other large cryptocurrencies is up, the DeFi market is seeing a different level of growth. This could be a sign that the crypto market is becoming more mature and selective, or it could be a sign that the current rally is being driven by a small number of large investors rather than a broad base of retail investors.
In any case, it’s important to keep in mind that the crypto market is still in its early stages and is subject to significant volatility and uncertainty. While the current flat DeFi TVL may be cause for concern, it’s important to remember that the crypto market is still in its infancy and that the DeFi space is still evolving. As the market matures and more investors enter the space, we may see more stable and sustainable growth in the DeFi market.