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Although crypto prices have shown a slow recovery in the short term, the breadth and underperformance of TradFi benchmarks for the month shows the current position.
Further, we look at how the financial growth of stablecoins and lending as stable sectors has been growing over the years.
Signs
Crypto markets remain stable after November’s aggressive sell-off. The past week has shown a slight recovery, with BTC at $90,400 now and 12% off the recent correction of $80,700. In the next 24 hours, the AI and Modular sectors were the best performers, and TAO (+6.4%) and TIA (+6.2%) were the main contributors to the short-term strength. The Perp Index was the biggest loser, while DYDX (-3.1%) and HYPE (-0.6%) accounted for the sector’s weakness.
The longer each month, the worse the picture. TradFi benchmarks such as Gold, Nasdaq and the S&P 500 are all in the green last month, while every crypto index we track is experiencing negative returns.
Growth is the worst in a month for all cryptocurrencies, with no safe haven. In particular, the Protocol Revenue index is the most successful among the crypto groups, showing the strength of the protocols that have the greatest responsibility.
Despite the recent strength, it remains to be seen whether this rally equates to a long-term decline, or whether the decline is in 2025.
Market Changes
Amidst the challenges, don’t lose sight of the big picture, and take a moment to appreciate how far we’ve come. During the bear market, DeFi lending only took $5 billion in deposits, a cyclical error within the larger financial system. In the past years, this figure has grown to $71 billion in deposits, having previously recorded nearly $100 billion.
Likewise, loans issued on these applications reached $1.6 billion during the bear market downturn. Since then, active loans have increased to $ 27 billion now, and recently exceeded $ 38 billion. These numbers have grown to a level worthy of attention, not just for crypto natives. Diversification can reduce both trends, upstream and downstream, on demand systems and current prices. But the 20x growth in high-quality tests in just a few years shows that the sector is far from growing.
Amidst the decline in crypto prices, the total amount of stablecoins has returned to reach $ 310 billion, after a short period of $ 10 billion outflow.
The growth of stablecoins is a phenomenon I would not bet against. Onchain Money Markets are the biggest beneficiaries of stablecoins, which are said to be the most widely used. Stablecoin borrowers look for yield, while borrowers look for dividends. While this type of property will be volatile, this should remain stable and sustainable for DeFi applications.
Of course, the stablecoin’s continued growth comes amid low onchain yields. Benchmark lending rates are at 3.6%, minus the SOFR at 3.9%. The increasing number of onchain stablecoins will continue to reduce inflation, and in the absence of price risk in the legacy prices, the growth of stablecoin use in the financial markets will be limited.
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