DeFi TVL Hits Two-Year Low, Struggles To Recover
According to DeFiLlama, a DeFi TVL aggregator, the total value locked (TVL) in DeFi has reached a two-year low. More importantly, the TVL has shown minimal signs of recovery this week.
DeFi Suffers Amid Bearish Market
In the past year, the crypto bear market has affected the growth of the DeFi sector. Therefore, DeFi TVL hit a new low on January 1st, 2023, the lowest in the past two years.
According to DeFiLlama, the TVL of all DeFi protocols fell to $44.2 billion during the weekend, the lowest since February 2021. As of today, the TVL has recovered slightly and climbed to about $45.3 billion.
Furthermore, the total value locked in the DeFi sector in December 2021 reached a peak of $213 billion. Hence, the current value is about 79% off its peak value.
This is a more significant dump than the crypto market, which is 72% off its all-time him of $3 trillion reached in November 2021.
The chart for the DeFi TVL is similar to that of the crypto market capitalization. TVL is expressed in USD, which influences the cost of crypto collateral.
Thus, the consumers dumping DeFi may not be the cause of the downturn. Instead, the DeFi sector’s downturn could result from a general fall in collateral value.
Meanwhile, Lido Finance, the liquid staking platform, leads the DeFi market with a TVL of about $6 billion and a market share of 13.5%. Most of the TVL is due to Ethereum staking on the platform. Besides, Lido only provides staking services for Ethereum and no other digital assets.
Ethereum Remains The King Of DeFi
MakerDAO, a pioneer in the DeFi sector and second largest protocol, has a similar market share and TVL with Lido Finance. Curve Finance, the stablecoin yield platform, comes in third position with about $4 billion locked.
However, Ethereum is the king of DeFi, with a TVL of around $26.3 billion and a 58% market share. On the other hand, the Binance-owned BNB Chain has a TVL of $5.3 billion, giving it an 11.7% share of the broader DeFi ecosystem.
Notably, not all DeFi networks have had a terrible record in the past year. Optimism, Tron, and Arbitrum blockchains have witnessed steady TVL growth in the past year despite the crypto winter.
Meanwhile, the poor market conditions have affected coins and tokens belonging to projects in the DeFi sector harder than their counterparts. Per CoinGecko, the market capitalization of DeFi assets has dropped by about 80% from its peak.
In addition, the market capitalization of DeFi assets is at $34.9 billion, recording a $1.5 billion trading volume in the past 24 hours. Coins with a high market capitalization that have taken a hit in the last year include Aave, Frax, Lido (LDO), Chainlink (LINK), and Uniswap (UNI).
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