Top 10 L1s & dApps by TVL, Bitcoin Battles Tighter Policy Outlook

JAN 04, 2022 • 4 Min Read

Genevieve Yeoh + 1 other

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN LUNA, AVAX, SOL, ETH, BTC, AAVE, LIDO, ANC AND ARBITRUM. MEMBERS OF OUR TEAM ALSO HOLD CVX, CRV, UNI, YFI, AND SPELL. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Top 10 Blockchains by Total Value Locked
  • Note: Ethereum TVL is on a separate axis to better highlight fluctuations in other L1 TVL.
  • The “multi-chain” narrative was strong in 2021 as various layer 1 blockchains and layer 2 scaling solutions emerged to address the scalability problems that have historically plagued Ethereum.
  • The amount of capital locked grew exponentially year-on-year on already existing chains like Terra (356x) and Polygon (17,100x) while new chains like Cronos and Arbitrum that launched in the later half of 2021 managed to eke their way into the top 10 list.
  • Influencing this exponential growth were push factors such as the high gas fees on Ethereum as well as pull factors including innovative projects being launched on other chains, not to mention farming opportunities from newly launched protocols. Various ecosystem funds were raised to incentivize users and developers to build on these native chains, facilitating further capital inflows.
Top 10 Decentralized Applications by Total Value Locked
  •  Amongst the top 10 biggest dApps by TVL, applications native to Ethereum still dominate, but multi-chain protocols such as Lido and Multichain (rebrand from Anyswap) have made their way onto the list as well.
  • DeFi “blue chips”, which fell out of favour in 2Q21, still managed to retain some top spots, perhaps as they are considered more battle-tested and a safer store of capital compared to newer competitors.
  • Curve sits atop the list largely due to the popularity of its stableswap invariant pools and CRV token emissions that keep liquidity sticky. Other complementary protocols have also been built on top of Curve, the most notable being Convex (see yesterday’s Daily here for more insight).
  • Anchor Protocol is the only protocol native to Terra on the list, attracting over $9bn of TVL since its inception in March 2021. This has spillover effects on Lido as well as it’s been a large beneficiary of Anchor’s growth.
Options Open Interest Diminished on Huge EOY Expiry
  • BTC and ETH options faced a large drawdown in open interest due to end-of-year expiries. As reported by Deribit, $5.5B of BTC contracts and $3.3B of ETH contracts expired on December 31st.
  • Furthermore, implied volatility, a measure of the market’s uncertainty, has trended down recently for both tokens and is currently at a 6-month low. However, it might be less indicative of market volatility due to a large part of options expiring; we’ll be monitoring this as option buyers re-enter the markets.
Bitcoin & Tighter Policy May Not Mix

  • The last few months of 2021 saw a material shift in the macro landscape away from the accommodative “do whatever it takes” rhetoric that characterized much of the last 18 months. Instead, policymakers now find themselves “behind the curve” as inflationary pressures continue to pressure major central bank leaders to hike rates sooner than initially anticipated.
  • We saw a glimpse of this last summer when forecasts for Fed funds futures began to tick higher as headline CPI in the U.S. topped 5% on a year-over-year basis. BTC did not perform well (to say the least) and it’s sell-off was exacerbated by mass liquidations and deleveraging.
  • Fast forward several months and we’ve seen a seemingly similar chain of events play out, with Fed funds futures implying higher rates as BTC struggles to combat tighter conditions and a significant slowdown in global liquidity growth.
  • Notably, the market is now pricing in at least one Fed rate hike as early as May 2022; Fed funds futures now imply a 100% chance of at least 3 rate hikes by the end of next year, compared to just one rate hike three months ago.
Notable Tweets

NEAR Protocol Thesis

Polygon 2021 REWIND

Terra Bridge to Osmosis Initiated

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Genevieve Yeoh + 1 other