Defi Market Was Influenced By Institutional Investors in Q2

Increasing institutional investment footprints in the crypto market segment has been a common theme in the decentralized finance market (DeFi).

Institutional investors played a major role in the adoption of blockchain in Q2 2021, according to blockchain intelligence firm Chainalysis.

In Q2 2021, over 60% of DeFi transactions accounted for transactions over $10 million, compared to less than half for all crypto transactions.

Banks and financial institutions are starting to commit capital into the crypto market segment due to DeFi’s appeal via the Ethereum blockchain.

The trend likely indicates that large-cap investors are increasingly interested in participating in the expanding DeFi field, instead of only offering Bitcoin-related investment products.

Additionally, Chainalysis’ preview report revealed an increasing gulf between DeFi and the broader crypto market in terms of adoption metrics.

DeFi activity is reportedly driven by institutions in major economies even as emerging markets continue to adopt legacy crypto assets such as Bitcoin (BTC).

Consequently, decentralized exchanges like Uniswap – the largest one in the ecosystem – are increasingly being scrutinized by regulators. The US Securities and Exchange Commission launched an investigation into Uniswap a few weeks ago.

Regulations in major economies have been discussing stricter monitoring protocols for the DeFi market. Gary Gensler, SEC chairman of the world’s most powerful economy, identified DeFi as one of seven crypto-related policy issues for the commission in August.

The decentralized nature of DeFi protocols has been criticized previously by Gensler, who said that many platforms are “highly centralized” and are required to be licensed by the authorities.

Despite a surge since July, recent price declines have tempered the market’s gains, with the market’s nominal total value locked falling under $100 billion.