Bitcoin [BTC] has experienced a significant uptick in decentralized finance (DeFi) engagement, witnessing a historic surge in Total Value Locked (TVL) to $6.9 billion as reported by DeFiLlama. This surge has propelled Bitcoin ahead of the BNB Chain, establishing it as the fourth-largest blockchain by this measure.
The surge in Bitcoin’s DeFi involvement began in late October coinciding with heightened demand for BTC yields. On October 21st, the TVL was below $1 billion according to DeFiLlama, indicating a remarkable surge of over six times within less than two months.
The increase in TVL can be attributed not only to the appreciation in BTC’s value but also to the growth in the number of coins locked within the network. Currently, these assets have risen from 34,980 BTC to 66,040 BTC at the time of this report.
What is fueling the surge in DeFi engagement on the blockchain?
Increasing interest in staking activities
Key to this surge is the Babylon staking platform, contributing a significant $5.6 billion to Bitcoin’s total TVL.
Based on data from the Babylon staking dashboard, more than 128,000 stakers have locked over 54,000 BTC on the platform, reflecting a mounting appetite for Bitcoin yields.
DeFiLlama data shows a 151% increase in the amount of BTC staked on this platform in just seven days.
This surge has elevated Babylon to the top as the leading Bitcoin DeFi project, outpacing the Lightning Network, which ranks significantly lower with a TVL of $530 million. This emphasizes a shift in BTC’s functionality from payments to DeFi.
Despite this growth, Bitcoin’s TVL still falls short of Ethereum’s $88 billion. The primary staking protocol on Ethereum, Lido, boasts a TVL of $38 billion.
After surpassing the BNB Chain, Bitcoin is now on the verge of overtaking Tron [TRX], whose TVL currently stands at $8.08 billion.
Impact on Bitcoin’s market performance
At the time of this report, Bitcoin was trading at $104,240 following a 1.67% increase in the last 24 hours. The cryptocurrency achieved a new all-time high of $106,488 on December 16th amidst growing institutional demand, with US-listed spot Bitcoin exchange-traded funds (ETFs) witnessing $2.17 billion inflows the previous week.
The rising DeFi activity could spark fresh interest in BTC, potentially leading to a surge in prices. Furthermore, staking could contribute to a reduction in selling pressure on the coin as traders look to generate yields.
DeFi engagement reaches new heights in 2022
Bitcoin isn’t the sole blockchain experiencing a surge in DeFi activity. The TVL across all protocols has soared to $154 billion, the highest level since May 2022.
Ethereum has seen an increase of over $24 billion in its TVL in just one month, while Solana’s TVL has expanded by more than $1 billion. Simultaneously, DeFi tokens like AAVE [AAVE)] have outperformed numerous altcoins.
This uptrend could drive further growth in Bitcoin’s TVL and potentially fuel a substantial rally for the leading cryptocurrency.