DeFi TVL Tanks to Lowest Level in 30 Months
Collateral locked in the decentralized finance (DeFi) ecosystem has reached its lowest level in two and a half years due to the bear market. DeFi total value locked has accelerated, reaching $42.45 billion, the lowest since February 2021.
DeFi TVL’s value dropped to $43.6 billion in December 2022, following the collapse of FTX and crypto markets’ cycle low. It has since reached $37.51 billion, a new low for DeFi. Collateral reached its peak in April at $64.5 billion, but has declined 34% since then, while crypto markets have only declined by 18%. DeFi TVL’s peak was $212 billion in December 2021, but it has tanked 80% since then, surpassing the 64% decline in crypto markets since November 2021.
DeFi collateral has declined due to factors such as a 10% decline in crypto markets, devaluing underlying collateral, and low yields. The Federal Reserve’s interest rate hikes make it difficult for DeFi platforms to match risk-free rates with safe yields. DeFi has also faced regulatory scrutiny in the US due to its decentralized nature. Additionally, ongoing exploits in the ecosystem, resulting in millions of dollars lost every month, may have eroded investor confidence in the sector.
(With inputs from Shikha Singh)
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