Decentralized finance (DeFi) summer is making a comeback, and while total value locked (TVL) in the crypto ecosystem is still well below its 2021 peak, it could climb to an all-time high as soon as the first half of next year, Steno Research said in a report on Friday.

DeFi's imminent resurgence is linked to interest rates, particularly in the U.S., because the decentralized finance market is predominantly U.S. dollar-centric, the report said.

"Interest rates are the most critical factor influencing the appeal of DeFi, as they determine whether investors are more inclined to seek out higher-risk opportunities in decentralized financial markets," analyst Mads Eberhardt wrote.

Steno notes that the first DeFi summer, in 2020, came hot on the heels of Federal Reserve interest-rate cuts in response to the Covid outbreak.

Still, interest rates are not the only driver behind a comeback in DeFi. There are also crypto-native factors at work. The growth in stablecoin supply, which has expanded by about $40 billion since January, is crucial because "stablecoins are the backbone of DeFi protocols," Steno said.

"As interest rates decrease, the opportunity cost of holding stablecoins diminishes, making them more attractive – much like the broader appeal of DeFi in such an environment," Eberhardt wrote.

The continued growth of real-world assets (RWAs) such as tokenized stocks, bonds and commodities is another key factor, and the 50% surge in these assets year-to-date indicates robust demand for on-chain financial products such as DeFi.

Lower fees on the Ethereum network, the blockchain most widely used for DeFi, also makes decentralized finance more accessible, the report added.

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