The decentralized finance (DeFi) and non-fungible token (NFT) sectors have undergone significant shifts in May 2023, with new trends emerging in liquidity, adoption, and investor behavior. TrustStrategy AI, a leading blockchain analytics firm, has released its May 2023 DeFi & NFT Market Report, uncovering critical developments shaping the future of Web3.

Key Findings from the Report

1. DeFi Market Recovery: TVL Growth & Layer-2 Dominance

• Total Value Locked (TVL) in DeFi increased by 11%, reaching $52 billion, the highest level since February 2023.

• Ethereum remains the leader (62% market share), but Layer-2 networks (Arbitrum, Optimism, Polygon) grew 23% month-over-month.

• Liquid staking derivatives (LSDs) like Lido Finance and Rocket Pool saw 30% TVL growth post-Ethereum Shanghai upgrade.

2. NFT Market Revival: Trading Volume & Blue-Chip Resilience

• NFT trading volume rebounded 18%, hitting $1.2 billion in May.

• Blue-chip collections (BAYC, CryptoPunks, Azuki) drove demand, with floor prices rising 8-15%.

• Bitcoin Ordinals gained traction, with over 500,000 inscriptions in May, signaling growing interest in Bitcoin-based NFTs.

3. Ethereum’s Dominance in DeFi & NFTs

• Ethereum processed 78% of all NFT trades and 65% of DeFi transactions.

• Gas fees dropped 40% due to Layer-2 adoption, improving accessibility.

• ETH staking surged, with 18.5 million ETH now locked in staking contracts.

4. Emerging DeFi & NFT Trends

• Real-world asset (RWA) tokenization gained momentum, with $500M+ in tokenized treasury products.

• NFT lending platforms (BendDAO, NFTfi) grew 25%, indicating increasing utility.

• DeFi derivatives (GMX, Gains Network) saw record volumes, suggesting institutional interest.

What’s Driving the Growth?

TrustStrategy AI identifies three major catalysts:

1. Ethereum’s Shanghai Upgrade – Enabled unstaking, boosting liquidity and DeFi participation.

2. Bitcoin Ordinals Boom – Introduced new NFT use cases on Bitcoin.

3. Institutional DeFi Adoption – Hedge funds and trading firms increasingly using DeFi for yield.

Future Outlook: Bullish or Correction Ahead?

While May’s trends are positive, potential risks remain:

• If ETH price drops below $1,700, DeFi TVL could decline.

• NFT market sustainability depends on new buyer demand.

• Regulatory scrutiny on DeFi could impact growth.