August’s monthly data shows that DeFi protocol fees and revenue dropped over 20% to their lows since February. What’s happned in August and will this likely persist in the future?
DeFi activity is generally tied to the overall sentiment and market cap of crypto tokens, in the same way that a higher stock market creates tangible wealth effects for the overall economy. The flash crash of early August caught most participants by surprise and led to painful liquidations, lowering investable capital across the board and overall user enthusiasm.
We are of the view that overall on chain and off chain activity will ebb and flow with the overall macro sentiment, especially with TradFi inflows remaining as the major theme absent any native breakthroughs. However, an additional wrinkle of concern would be in new token supply, where we are supposed to see quite a lot of TGEs (issuance) in Q4, and weighing on overall sentiment against a dwindling capital base.