The decentralized finance (DeFi) sector is poised for a revival, with the total value locked (TVL) in the crypto ecosystem having the potential to reach all-time highs in the first half of 2025, according to a report published today by Steno Research.

Steno Research Predicts DeFi Summer Poised for a Comeback

Although current TVL levels remain below the 2021 peak, analysts expect a significant revival driven by several key factors.

The report highlights the impact of US interest rates on the DeFi market, which is largely dollar-centric.

“Interest rates are the most critical factor affecting the appeal of DeFi, as they determine whether investors are more inclined to seek higher-risk opportunities in decentralized finance markets,” said Mads Eberhardt, an analyst at Steno Research.

Steno Research draws parallels between the anticipated DeFi revival and the first “DeFi summer” of 2020 after the Federal Reserve lowered interest rates in response to the COVID-19 pandemic.

As interest rates fall, the appeal of DeFi increases due to the lower opportunity costs of holding the stablecoins that are necessary for the operation of many DeFi protocols.

Beyond interest rates, the report also identifies crypto-specific factors that are driving DeFi’s comeback. Stablecoin supply, which has increased by nearly $40 billion since January 2024, plays a crucial role in the ecosystem.

“Stablecoins are the backbone of DeFi protocols,” the report says, emphasizing their importance in the recovery of the sector.

*This is not investment advice.