Aave, Compound, and MakerDAO, the three largest DeFi holders on Ethereum, have reached a record high in deposits. The firms recorded a cumulative $25 billion in deposits for the first quarter of 2021.
The top three lending DeFi platforms on Ethereum have hit a record high in the first quarter of 2021. However, the firms are heading to a bumpy start of the second quarter attributed to the declining crypto prices.
A report released by Messari shows that Aave, Compound, and MakerDAO had a cumulative holding of over $25 billion. Out of these deposits, $10 billion was distributed to other users on the platform. Compound had the highest number of loans standing at 53%, while Aave and MakerDAO had 17% and 30%, respectively.
The lending sector went parabolic during the first quarter of 2021.
DeFi’s most popular lending platforms reached $25 billion, the highest the sector has ever seen, including
+ @MakerDAO pic.twitter.com/MDtf63djXz
— Messari (@MessariCrypto) April 23, 2021
Growth of DeFi market
DeFi, also known as decentralized finance, refers to protocols based on blockchain that eliminate the need for intermediaries. On DeFi, users do not need to get approvals from an intermediary before getting a loan. Instead, they can get loans from other users on the DeFi platform.
The report from Messari is proof that the DeFi market is growing at a rapid rate. This growth can be traced back to the second quarter of 2020, when market volatility pushed people towards investing in crypto assets. DeFi Pulse, an analytics platform for DeFi protocols, stated that more than $55 billion had been deposited in lending platforms, exchanges, and crypto derivatives.
Ethereum has also been doing relatively well, given that it hit a record high price of over $2000 in April 2021. The rising price of Ethereum also raised the prices of protocols that run on the Ethereum network. Therefore, the high deposit figures are attributed to the rising values of crypto assets.
Q2 market uncertainty
The first quarter of 2021 has been bullish for the entire crypto market, given that it was in this period that the market reached a market cap of over $2 trillion. However, Q2 might not be as promising as the first quarter going by the decline in prices of crypto assets.
Bitcoin, the largest cryptocurrency, dipped from above $58,000 to around $50000 by April 24. Ethereum is also on a downward spiral. As these prices reduce, the value of Ethereum-based tokens will also reduce significantly. Aave has reported a 22% loss because of the reduced price of ETH. On the other hand, Maker and Compound have reported 22% and 10% gains.