Total Bitcoin Locked in DeFi Nears Record High

The total value of Bitcoin locked in DeFi is rebounding from a three-month low to the highest since November, when BTC in decentralized finance protocols was at its all-time high of 154K BTC, according to data by DeFi Pulse.

BTC in DeFi protocols has climbed by 17K BTC since the Jan. 3 low, to ~153K BTC, worth almost $5B. An all-time high appears eminent.

The climb towards an all-time high in January has come on the heels of a 4% drop in December, while the cryptocurrency’s price was surging by 50%.

With an 8% increase, Bitcoin is coming back to DeFi in January. This may be due to a cool off in Bitcoin’s price increase. Bitcoin’s 20% increase in January may be leading some investors into DeFi to increase their yield.

Higher Returns

Chris Spadafora, operations lead at BadgerDAO, a DeFi product suite for collateralized Bitcoin, told The Defiant he believes the BTC’s December TVL “dropped off because of the need for higher returns to justify inherent risk that is defi.”

Spadafora expands, saying Bitcoin’s price increases make it easier for people to justify simply holding the asset rather than “trying to squeeze 20-40% more interest out of it.”

As for why investors are jumping back in in January, Spadafora gave another possible reason: investors can now borrow more stablecoins as their Bitcoin has become more valuable.

BTC’s TVL January jump may also be due to Ethereum and DeFi tokens outgaining Bitcoin on the year. As ETH has gained 52% and Defi Pulse Index, a rough proxy for DeFi, is up 106%, investors may be using their BTC as collateral to access ETH and DeFi tokens, to ride the wave.