Is DeFi back? Crypto OTC desks report rebound in interest

With bitcoin seemingly struggling to breach $35,000, traders in the cryptocurrency market appear to be turning back to the decentralized finance space for outsized returns, according to several exchange executives. 

In recent days, trading firms have reported a renewed interest in the DeFi market and the coins tied to popular DeFi protocols. Genesis Global Trading, a New York-based trading firm, said that it has seen "larger ticket sizes across the major names." The most popular DeFi coins include UNI, CRV, and SUSHI. 

Richard Rosenblum, founder of GSR Trading, said he's noticing a similar trend play out, noting that it resembles previous cycles in which investors have moved from bitcoin to alts. 

"There has certainly been a resurgence in DeFi," he wrote in a note to The Block. "I'd liken it to the majors/alts cycles — i.e. now that BTC has had time to calm down, people are looking for the next thing to invest in."

Indeed, traders are seeing opportunity once again in yield farming, according to Evgeny Gaevoy, CEO of market-making firm Wintermute. The market had slowed significantly since the summer when it was popular for investors looking for an opportunity to score a high yield to park capital into various DeFi protocols.

Now, DeFi yields are picking up again, and that's drawing participants back in. What's behind the trend? The explosion in the price of ether and various DeFi-related tokens, according to Genesis.

"Both funding rates on alts and yields from farming have ticked up," the firm said, adding: "The yields are highly reflexive as token price begets better yield, more TVL (total volume locked), more volume on the protocol, higher token price, and so on."

The price of SUSHI, the governance token for the automated market-maker Sushiswap, touched all-time highs over the weekend, nearing $10 according to data from TradingView. Meanwhile, Uniswap's UNI surged to $14.25 earlier Tuesday and at the time of writing is up more than 68% over the last seven days. 

Looking at DEX volumes, it's clear that traders have flocked back. DEX volumes more than doubled in January compared to December 2020, hitting $45 billion. 

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DEX volume as a proportion of centralized exchange volumes is also increasing gain after sliding during much of the fourth quarter. At the time of writing, DEX volumes accounted for 6.2% of total centralized volumes, according to data from The Block. 

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