Algorand DeFi is booming. Here’s why

by Arthur · October 14, 2022

Table of Contents

Important takeaways

The liquidity flows into Algorand’s DeFi ecosystem. The total value locked on Algorand reached $270 million for the first time today.
Hivemind Capital injected $25 million worth of capital into Algorand DeFi, giving the ecosystem an injection of liquidity.
Several other catalysts have helped Algorand grow ahead of other projects, but the upturn may be short-lived due to the macro climate.

Crypto investment company Hivemind deploying $25 million in Algorand DeFi is one of several catalysts attracting liquidity to the Layer 1 chain.

Algorand receives VC Boost

A new cash injection has helped boost DeFi activity on Algorand.

Money flowing into the Layer 1 blockchain ecosystem has risen sharply this following week an announcement that Hivemind Capital had distributed 80 million ALGO tokens in various DeFi and governance programs across the Algorand ecosystem. At today’s price of $0.31 per ALGO token, Hivemind’s commitment amounts to more than $25 million.

Following Hivemind’s announcement, the total value locked in DeFi apps on Layer 1 hit a new all-time high, topping $270 million for the first time in blockchain history today. Per DeFiLlama data, the total value locked on Algorand has jumped 53.95% this week, and several Algorand-based DeFi protocols have benefited from the increase in liquidity. Decentralized exchanges such as Tinyman and Pact have recorded double-digit gains in their total value locked in the past 24 hours, while AlgoFi, a one-stop shop for lending, borrowing and trading, has shot up over 17%.

Algorand’s ALGO token also reacted positively to the news. After suffering a fall in response to Thursday’s warmer-than-expected CPI print, it jumped over 10%, helped by a broader market rally.

More Algorand catalysts

Hivemind’s commitment to Algorand’s DeFi ecosystem isn’t the only tailwind driving interest in the Layer 1 chain. Elsewhere, digital collectibles trading app FIFA+ Collect has brought a wave of soccer fans to Algorand since its launch on September 22. FIFA+ Collect allows users to collect memorable moments from the top matches in FIFA history and exchange them with other users through the FIFA+ Collect marketplace. So far, the platform has sold over 158,000 packages through the origin drop. It is likely that interest in FIFA+ Collect will continue to increase in the build-up to the FIFA World Cup in November.

Another notable update for the Algorand ecosystem is FTX’s decision to support native USDC. Users can now deposit and withdraw USDC stablecoins directly between the Algorand blockchain and their exchange wallet. FTX previously only supported ALGO token transactions. The update makes it easier for FTX users to deposit dollar-denominated funds on Algorand for use in the blockchain’s DeFi ecosystem or on FIFA+ Collect.

More generally, Algorand has also secured several partnerships worldwide. In the Philippines, fintech company AID:Tech is creating a mobile banking wallet solution that uses the Algorand blockchain for transactions. El Salvador, the country that made headlines last year when it became the first to make Bitcoin legal tender, has also declared Algorand as its official blockchain partner. More recently, in a new report from July, Italy’s central bank also revealed plans to leverage the Algorand blockchain for a possible central bank digital currency.

With so many positive catalysts driving adoption, it’s not surprising that Algorand has continued to grow while activity in other tier 1 chains is slowing. Since the start of the year, the total value locked in protocols on Algorand has increased by 269%. In comparison, the total value locked on Avalanche has dropped by 86%, while Solana is down 85%. Still, with global macroeconomic turmoil showing no signs of letting up, it may be difficult for Algorand to continue growing at the same pace going forward.

Disclosure: At the time of writing this piece, the author owned ETH, SOL and several other cryptocurrencies.

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