The decentralized finance (DeFi) activity linked to Bitcoin [BTC] has seen a significant increase, with its Total Value Locked (TVL) reaching an all-time high of $6.9 billion as per DeFiLlama. This surge has propelled Bitcoin past BNB Chain, positioning it as the fourth-largest blockchain in terms of this measurement.
Bitcoin’s DeFi engagement began to climb towards the end of October as the demand for BTC yield saw a rise. On October 21st, DeFiLlama indicated a TVL below $1 billion, highlighting a surge of over six times in less than two months.
The escalating TVL is not solely due to BTC’s price surge but also involves a growth in the tokens locked on the network. The number of these assets has jumped from 34,980 BTC to 66,040 BTC currently.
What factors are fueling the surge in DeFi activity on the blockchain?
Increasing Desire for Restaking
The primary driver behind this surge is the Babylon staking platform, responsible for $5.6 billion of Bitcoin’s overall TVL.
Based on the Babylon staking dashboard, over 128,000 participants have staked more than 54,000 BTC on the platform, reflecting a growing interest in Bitcoin yield.
According to DeFiLlama, the amount of BTC staked on this platform has surged by 151% in just seven days.
This surge has propelled Babylon to the top spot as the largest Bitcoin DeFi initiative. Its growth has even surpassed that of the Lightning Network, which ranks as a distant fifth with a $530 million TVL, indicating a shift in BTC’s utility from payments to DeFi.
Despite this growth, Bitcoin’s TVL still falls short compared to Ethereum’s $88 billion. Lido, the leading staking protocol on Ethereum [ETH], boasts a TVL of $38 billion.
Impact on Bitcoin Price?
At the current moment, Bitcoin is trading at $104,240 following a 1.67% increase in the past 24 hours. The flagship cryptocurrency reached a new all-time high of $106,488 on December 16th amidst growing institutional interest, with US-listed spot Bitcoin exchange-traded funds (ETFs) witnessing a $2.17 billion influx last week.
The surge in DeFi activity could generate fresh demand for BTC, potentially driving prices higher. Additionally, staking could help decrease selling pressure on the coin as traders aim to generate yield.
DeFi Activity Reaches Heights in 2022
Bitcoin isn’t the only blockchain experiencing a surge in DeFi activity. The TVL across all protocols has reached $154 billion, marking its highest point since May 2022.
In just one month, Ethereum has seen an increase of over $24 billion in its TVL, while Solana’s TVL has grown by more than $1 billion. Simultaneously, DeFi tokens such as AAVE [AAVE)] have outperformed many altcoins.
This upswing could lead to further growth in Bitcoin’s TVL and potentially result in a significant rally for the leading cryptocurrency.