Industry trends in the first quarter of 2021: NFTs are gaining popularity, while DeFi is beginning to cool down

The dollar value of crypto assets in DeFi applications appears to have grown 150%, from approximately $20 billion to $50 billion, in the first quarter of 2021. However, much of this activity reflects the rising dollar value of Ethereum and other Ethereum-based tokens, rather than growth in the actual number of crypto assets under management.

We can see that DeFi’s total locked value (TVL) grew by 50% during the quarter and gradually pulled back towards the end of March.

Decentralized exchange (DEX) volumes also saw a similar pattern of steady growth, with a slight decline towards the end of the first quarter.

Stealing the DeFi limelight is the NFT sector, with some markets seeing over 25x growth in trading volume and valuations exceeding $2 billion.

NFT marketplaces like NBA TopShot are quickly approaching levels of user activity seen in top DeFi applications. However, it remains to be seen how much of NFT’s initial flurry of activity will extend past the end of the year.

NFTs are unique, indivisible crypto assets that can represent a variety of commodities such as art, videos, music, real estate, news stories, and even tweets. The ownership of NFTs can be verified through public blockchains such as Ethereum, making them difficult to forge but easy to authenticate.

In the past three months, financial and mainstream media have been impressed by the novelty of NFTs and the mass adoption of investors. Christie's, a well-known British auction house, sold an NFT artwork by artist Beeple for $69 million. Shortly thereafter, another well-known auction house, Sotheby's, announced on March 16 that it would plan to hold its own NFT artwork auction.

Despite the hype surrounding NFTs last quarter, the value and user activity of DeFi applications remained stable.

In the first quarter of 2021, the two most popular decentralized applications (Dapps) by number of active accounts across all general-purpose blockchains were both DEXs. Uniswap, which runs on Ethereum, had an estimated 55,000 active accounts at the end of the quarter. PancakeSwp, which operates on Binance Smart Chain, has nearly 50,000 accounts.

Despite the lackluster novelty of NFT applications in the first quarter, much of the activity in the DeFi space reached dizzying heights before 2020 and will remain the same in 2021.