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The decentralized finance (DeFi) sector within the Ethereum network is poised for a major breakthrough. This projection is based on recent observations within the ecosystem and the broader cryptocurrency space. Renowned analyst and cofounder of Syncracy Capital, Ryan Watkins, asserts that the current setup for Ethereum DeFi is the strongest it has been since 2020.

DeFi’s strong revenue growth and low valuations

The optimism lies in several factors such as the volume of revenue, upgrades in technology and the pending spot Ethereum exchange-traded-funds, ETFs, awaiting the final nod by the United States Securities and Exchange Commission (SEC).

Per Watkins' analysis, DeFi leaders are seeing record-high revenues, while their valuations are at historic lows. This combination of high revenue and low valuation presents a compelling opportunity to investors.

Some of the leading DeFi applications on the Ethereum network, such as Lido, MakerDAAO, Uniswap and Aave have recorded progressive increases in revenues, surpassing their 2022 peaks. Aave's annualized revenue for 2022 was just over $500 million. However, in May 2024, it reached an all-time high of $750 million.

Furthermore, this revenue is expected to grow even more as DeFi leaders implement major upgrades, such as Maker's Endgame and Uniswap V4.

Additionally, the introduction of the Ethereum ETF is anticipated to spark renewed interest in the Ethereum economy. Despite facing a challenging regulatory environment since "DeFi summer," the sector is gradually seeing improvements. Although there are no major policy changes expected in the near term, the overall narrative is becoming more favorable.

Market momentum and future prospects

Watkins insists that as long as the long-term bullish trend continues, DeFi should benefit from positive momentum, given its highly cyclical nature. Market experts are optimistic that more and more users will be attracted by the DeFi offerings, further fueling growth.

Although Uniswap is yet to generate any revenue, Watkins maintains that the potential for activating the fee switch seems imminent.