Bitcoin As we approach all-time highs, analysts at research and advisory firm Bernstein are predicting a significant recovery in the Decentralized Finance (DeFi) sector.
Bitcoin The recent BTC rally, in which the price reached nearly $69,000, is largely attributed to strong inflows into spot ETFs. However, Bernstein analysts Gautam Chhugani and Mahika Sapra predict that the next phase of the market recovery will be led by the DeFi sector.
According to the data, DeFi protocols, cryptocurrency It constitutes six of the ten largest revenue-generating platforms in its field. The DeFi sector was “completely wiped out” during the last cycle due to unsustainable returns driven by token incentives (inflation), which eventually led to a market crash. This was exemplified by the collapse of the Terra ecosystem in May 2022, resulting in the loss of approximately $40 billion of investor wealth.
But this time, analysts argue that the return is real and accrues value based on the fees generated by the underlying application. As an example, recently UNI They cited Uniswap, which offers a fee-sharing mechanism for token stakers.
Uniswap, the largest decentralized spot exchange, generated $2 billion in transaction volume in the last 24 hours, accounting for more than 50% of the transaction volume according to the centralized exchange Coinbase, and is the largest DeFi fee-producing protocol with approximately $3.7 million per day.
Ongoing fee sharing voting could transform the UNI token from a simple ‘voting’ token into one with a yield earned through protocol usage fees. Analysts expect multiple DeFi protocols to follow suit.
Chhugani and Sapra also addressed concerns about the US Securities and Exchange Commission’s proposal that all cryptocurrencies, except Bitcoin, can be securities. The crypto industry views these as tokens tied to permissionless protocols without a specific investment agreement.
Analysts cited the ongoing Coinbase vs SEC lawsuit, which alleged that Coinbase was an unregistered securities exchange and identified 12 tokens as securities. They believe that the crypto industry has an opportunity to change the ‘legal’ discourse regarding tokens, given the different approaches taken by the courts in recent cases such as Ripple vs SEC.
Bernstein has allocated a 15% share to DeFi in its digital assets portfolio, which is up 15% year-to-date.
*This is not investment advice.
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