DeFi's explosive growth from under $1 billion to over $175 billion in TVL by 2021 showcased its potential, but subsequent declines highlight the sector's challenges.
As interest rates rise, traditional financial instruments attract investors away from DeFi, pushing the sector to redefine its value proposition to maintain relevance.
The market cap of DeFi projects, which stands at $28 billion, is now less than that of meme coins ($40 billion), indicating a shift in investor sentiment.
While TVL in DeFi dipped to around $37 billion in late 2023, the sector could recover as central banks begin rate-cut cycles, potentially boosting interest in DeFi.
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