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American banking giant JPMorgan has shed light of optimism in the decentralized finance (DeFi) and non-fungible tokens (NFT) sectors.

A JPMorgan report published Thursday revealed notable revival in the DeFi and NFT activity, spurred by an improved crypto markets sentiment. Titled ‘Resurgence in DeFi and NFTs: A Market Shift,’ the study attributes the resurgence to the recent US Bitcoin ETF expectations.

The report stressed DeFi and NFT market recovery, though positive in recent times, are only “tentative signs of revival.”

“While there is no doubt that the recent resurgence in DeFi/NFT activity is a positive sign, it is too early to get excited about it.”

A team of analysts led by Nikolaos Panigirtzoglou, noted that the increase comes nearly after two years of market decline. “Thus, creating some optimism that the worst might be behind us in terms of the medium-term trajectory for DeFi/NFT activity.”

Increased Trading Activity in Decentralized Exchanges

The analysts further wrote that some DeFi recovery is “natural,” given the rise in trading activity in decentralized exchanges (DEX).

DEXs are rapidly gaining popularity in the crypto world for their emphasis on user control, privacy and security. According to DefiLlama, trading volume on DEXs rose to $133.1 billion in March 2023, the third straight monthly increase.

Further, liquid staking by Lido has also contributed to the improvement in DeFi since early 2023, the JPMorgan report noted. Lido (LDO) liquid staking solution for Ethereum allows users to earn staking rewards without locking assets.

The analysts also pointed out Ether (ETH), which has underperformed other cryptos, impacting the total value locked (TVL) measurement. This “would mechanically show some revival given the price of several smaller cryptocurrencies has risen by more than ether in recent months,” they added.

However, the emergence of new blockchains, DeFi protocols, and NFT platforms is seen as encouraging, the bank said. Ethereum blockchain still faces issues like “network scalability, low transaction speeds and higher fees,” despite the rise in DeFi.

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