Messari, the crypto market analytics firm, has indicated that the collective capitalization of the decentralized finance (DeFi) sector is equal to only 1.5% of the entire crypto capitalization. 

It has been reported that according to Messari, the collective capitalization of every DeFi project put together is around $4.12 billion, less than that of the fifth-ranked crypto asset by market cap, Bitcoin Cash (BCH).

However, analyst Ryan Watkins also noted that “literal meme coin” Dogecoin (DOGE) boasts a larger capitalization than every DeFi project with the exception of MakerDAO (MKR).

In spite of the recent DeFi boom leading to claims the sector is overvalued, Watkins believes that the small size of the DeFi sector means it still has significant room to expand by arguing that it could benefit from a “reallocation” of capital from top 30 projects that are “useless first-gen cryptocurrencies, ghost town ‘ETH killers’, and dead projects.”

He added:

“DeFi doesn’t need new money flowing into crypto to continue its rise. All it needs is a reallocation of capital.”

Likewise, Messari’s data only looks at the capitalization of popular DeFi tokens, including the freshly launched Compound (COMP) and Balancer (BAL) tokens.

As per the report, with only a meager percentage of total token supply currently in circulation for both projects, and significant controversy surrounding the role of FTX’s derivatives in reportedly driving the recent price discovery of both tokens, some crypto analysts are skeptical of the immediate growth potential of DeFi tokens that have recently surged in price.

The recent crypto rally that saw Bitcoin (BTC) push above $11,000 and Ethereum (ETH) exceed $300 for the first time in roughly 12 months has not significantly dampened down enthusiasm for DeFi tokens.

Thus, according to DeFi Pulse, Less than two months after breaking above $1 billion for the second time, the value of funds locked in DeFi currently stands at $3.7 billion.

Source: Cointelegraph | Image: The Block Crypto