Reflections on DeFi: From Summer Days to Present

Co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed are their own and do not reflect their employers.

If you’re like me, you look back on the halcyon days of DeFi Summer in 2020 with sweet nostalgia.

Our industry was still in its youth, untouched by the trauma of the FTX meltdown and the widespread credit crisis that underpinned it.

It was a time of experimentation—tokens were popping up left and right, “degens” were yield farming, and developers were orchestrating new tokenomics models. Ponzi schemes and scam coins, rather than being ridiculed, became oddly sought after.

When I think about this summer, it feels like it’s missing many elements of that past degeneracy. If 2020 was DeFi Summer, then 2024 feels like Bitcoin Summer. Bitcoin dominance has risen by 10% since the start of the year, reaching 59% on Aug. 5—a three-year high. Meanwhile, DeFi dominance has significantly declined, recently hitting a three-year low. It seems the degens aren’t degening this cycle. In a way, the upcoming election has sucked a lot of the oxygen out of the room, even within crypto, and has become part of the cultural zeitgeist. The fact that Polymarket has become the darling of crypto this summer speaks to this reality.

Upon closer examination, DeFi isn’t necessarily dead. Trading volumes on decentralized exchanges reached 13.9% in July—the highest level ever. Additionally, new tokens launching on DEXs remained steady throughout the summer after a spring surge, partly driven by the Cambrian explosion of memecoins on Solana.

Meanwhile, DEX futures trading volumes as a percent to CEX futures trading volumes stand at 6.6% with 15 days left in the month.

Obviously, the price action is brutal—but it’s brutal for everything. Uniswap’s governance token is down 22% over the past month, while Coinbase stock has dropped 20%. DeFi feels dead because everything feels a bit off.

Unlike during DeFi Summer, traders now have to pay attention to much more than just crypto. Kaledora of Ostium pointed this out in my DMs earlier this week:

“Crypto traders are left with no choice but to pay attention to macroeconomics. The reality that you probably need to know what the BoJ is doing if you’re trading memecoins is quickly becoming clear (who would have said this a year ago?!).”

She’s right. This week hasn’t been much better for crypto, despite a rally in global equities.

Bitcoin, for instance, is down 1% over the last five days, even as the S&P 500 has gained 3.5%. What’s going on? Market down, Bitcoin down; market up, Bitcoin down.

As one trader put it to me yesterday: “No bid in crypto.”

Brutal.

The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter, which hits inboxes on Tuesday and Friday mornings.

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