DeFi Assets Consolidate Gains As Market Cools

Top DeFi assets are on a tear despite the broader markets pulling back since July 14, with $60M wiped from the combined cryptocurrency market cap in five days.

Synthetix (SNX) led the charge with a 30% gain, ranking as the second-best performing digital asset among the top 100 over the past seven days behind Ripple (XRP), which surged 60%.

Optimism (OP) ranked fourth with 26%, followed by 1inch Network (1INCH) with 25% despite shedding 16.5% in the past 24 hours, Uniswap (UNI) with 18%, and Solana (SOL) with 15.4%.

Arbitrum (ARB) and Chainlink (LINK) also ranked among the week’s top ten gainers after rallying 14.5% and 13.5% respectively.

In comparison, Bitcoin and Ethereum are both down roughly 1% in seven days, and more than 5% since July 14.

Ripple Ruling Delivers Blow To SEC

Last week’s bullish momentum was kicked off after the U.S. Securities and Exchange Commission (SEC) suffered a blow in its campaign against digital assets.

On July 13, the judge overseeing the SEC’s lawsuit against Ripple ruled that the XRP token is not itself a security, regardless of whether the asset is sold via a securities contract. With SEC chair Gary Gensler arguing that every digital asset bar Bitcoin is a security, cryptocurrency investors breathed a sigh of relief in response to the court’s ruling.

Assets named as securities in the SEC’s recent lawsuit against Binance rebounded strongly. In addition to XRP and SOL, Decentraland (MANA), Algorand (ALGO), and Axie Infinity (AXS) each gained more than 5% over the past seven days.

L2 Growth Ramps Up

The value of assets locked in DeFi protocols trended sideways since July began despite the recent bullish momentum for DeFi assets. The total value locked (TVL) in DeFi protocols sits at $44.2B, according to DeFi Llama, with Ethereum accounting for 58.6% of the sector’s TVL.

The market share commanded by Layer 2s continues to grow. L2 TVL increased nearly 6% in seven days and posted a new all-time high of nearly $10.6B on July 14, according to L2beat.

Optimism was the top gainer with a $2.4B TVL following weekly growth of 13.4%, closely followed by Arbitrum with $6B after 4.5% growth, and Starkware with $103M and 44% growth. ZkSync Era, the third-ranked L2, posted outflows of 9.2%, bringing its TVL to $572M.

Ethereum On-Chain Activity Picks Up

Ethereum’s on-chain activity is regaining steam after dropping off in mid-June.

The network burned more than 10,500 ETH (nearly $20M) over the past seven days, accounting for 3.6% of all Ether destroyed since The Merge was activated 306 days ago, according to Ultra Sound Money.

Average transaction fees are currently 33 gwei on Ethereum. Uniswap was the largest driver of burned ETH during the past week, followed by token transfers, Tether, and zkSync Era.

Institutional Investors Seek Bitcoin Exposure

According to CoinShares, institutional investors poured more than $742M into digital asset investment products over four weeks ending July 14, marking the largest consecutive inflow since the bull market peaked in Q4 2021.

Bitcoin represented 99% of inflows over the past week with $140M, while products offering exposure to Bitcoin shorts suffered their 12th consecutive week of outflows with $3.2M.

Ethereum was the only asset to post a weekly outflow, with investors pulling $1.6M from products tracking ETH. Ether products are the worst-performing of 2023 so far, posting a year-to-date outflow of $74M.

Combined trade volume for institutional crypto products remained high at $2.3B for the week, beating out 2023’s weekly average by 48.5%.