The value of locked-in assets (TVL) in decentralized finance (DeFi) continues to soar.

This coincides with the major growth in the price of Ethereum.

DeFi players recorded an additional $ 3 billion in value across all platforms on January 3, an amount nearly five times the overall DeFi market at the start of 2020.

Ethereum’s recent record high bodes well for the entire DeFi system, helping it surpass the $ 30 billion mark.

Now approaching $ 32.5 billion as Ethereum prepares to test the $ 1,700 level, DeFi continues to explode. This coincides with a size growth of some of the best DeFi platforms.

Tokens like UNI and AAVE are also breaking their record highs. More and more people are flocking to alternative financial systems that offer better borrowing and lending rates.

Even though Ethereum transaction fees have reached record highs, use of the DeFi platform has continued to increase.

DeFi: The decentralized takeover of finance

A year ago, the TVL (total locked-in value) in DeFi was well below $ 1 billion. It has since increased by more than 4,500%.

On February 3, DeFi’s daily growth value increased by about $ 3 billion. This is significantly larger than the size of the entire market not too long ago. There are several reasons for this growth, the current social and economic difficulties being one of the first examples.

With rising inflation and in some cases complete lack of access to a functioning financial system, decentralized finance offers a user-centric alternative. These platforms are permissionless and provide greater value propositions than their traditional counterparts.

Some of the most popular cases of DeFi are trading platforms, lending and borrowing, interest, and insurance-type risk management.

New alternatives focused on users

However, even without focusing on the nature of DeFi, the offer is enough to convert savvy users to this new ecosystem.

Maker DAO , the best DeFi platform with almost $ 6 billion locked in, offers hugely beneficial lending options. Users can lend or receive a loan, turning users into stand-alone banks that can earn interest or borrow at competitive rates.

In addition, there are also options like Uniswap, the largest decentralized exchange (DEX) in the market. Uniswap, has succeeded in transforming ICOs ( Initial Coin Offering ) and centralized token launches based on exchange.

With a DEX, any project can instantly list their token and provide cash as a market player. This allows the entire life cycle of transactions to take place without paying exorbitant fees to exchanges to get a project listing.

The increasing participation of institutional investors in the crypto space and attractive investment opportunities in decentralized finance (DeFi) are driving the range of Bitcoin (BTC) and Ethereum (ETH) to new lows on the crypto exchanges. Why that is rather bullish for ETH and BTC.

Thanks to the social and macroeconomic developments in recent months, more and more people are setting up accounts and wallets for crypto exchanges. The cryptocurrency sector is moving more and more into the limelight and more and more people are questioning the decision-making processes of governments and central banks. These developments can also be observed on Google Trends:

The search queries for the keyword “crypto currencies” are at a new high for the year. Conversely, this can also increase the pressure to buy Ethereum and Bitcoin.

ETH and BTC stocks on crypto exchanges at record low

Meanwhile, the increasing amount of Ether and Bitcoin Up that is deposited in the DeFi sector to generate interest means, among other things, that fewer and fewer BTC and ETH are on crypto exchanges. Data from the crypto analysis company Glassnode illustrate this development at Ethereum:

Also, many analysts believe that the rapidly expanding DeFi sector, the staking rate of ETH 2.0 and the increasing participation of institutional investors are the main reasons behind the decline in crypto exchanges.

Institutional investors are realizing the value of Ethereum and Bitcoin

Bitcoin has piqued the interest of institutional investors since 2020. Companies such as MicroStrategy and Square have brought Bitcoin into the mainstream and, among other things, ensure that the crypto space receives attention.

In addition, some companies and institutions see Bitcoin as a legitimate investment and are now looking for the next big opportunity. Many of you will find these in the rapidly growing DeFi sector on Ethereum – which has sparked a DeFi boom on the crypto exchanges.

Also, Grayscale Investment has seen a huge surge in interest in its crypto trusts. In 2020, the asset manager even had to close due to the dramatic rise in Bitcoin and Ethereum prices.

But the restrictions were lifted again at the beginning of January and since then the Ethereum Trust (ETHE) in particular has developed very well . As a result, there are even fewer Bitcoin and Ethereum to buy on crypto exchanges and the supply is becoming even scarcer.

DeFi boom: Investors are withdrawing ETH and BTC from crypto exchanges

The DeFi sector has grown by far the most in recent months . The number of users of DeFi projects increased every week and at the same time the total value locked indicator, which shows how much capital is tied up in DeFi protocols, reached a new high.

The largest DeFi protocols are currently all on Ethereum. So users need ether in order to be able to interact with them. In addition, DeFi is another factor in ETH and BTC stocks on crypto exchanges falling.

Because, for example, you can let your capital in the DeFi sector work for you through lending or liquidity mining and receive attractive returns in return. As a result, more and more people are withdrawing capital from crypto exchanges. This trend currently affects Ethereum, many ERC-20 tokens and also tokenized Bitcoin .

Due to the continued growth of the DeFi sector and the increasing interest of major investors in Bitcoin and Ethereum, it can be assumed that the decline in BTC and ETH stocks on the crypto exchanges will continue. However, thanks to the great demand, this is not of any further concern for the time being.

Overall, the fundamentals continue to paint a bullish picture for Ethereum and Bitcoin.