- The total value of assets locked within the DeFi ecosystem has plummeted to its lowest level since February 9, 2021, due to the crypto winter and price drops.
- The main causes of the decline include significant drops in altcoins and a general decrease in cryptocurrency activity.
- Ethereum liquid staking platform Lido continues to be the largest DeFi project, with a total value of $14.10 billion.
As a result of the crypto winter, the total value of assets locked in the DeFi ecosystem has dropped to its lowest level in over two years. The decline is largely due to significant drops in altcoins and a general decrease in cryptocurrency activity. Despite this, Ethereum liquid staking platform Lido remains the largest DeFi project, with a total value of $14.10 billion.
DeFi TVL Experiences a Dip
The current decline represents a significant drop from the peak of $175 billion recorded in November 2021. At that time, most altcoins were trading at peak prices. Many cryptocurrencies, including ETH, have since experienced drops of more than 60% from their peak prices, leading to a collapse in TVL. However, other factors have also contributed to DeFi’s decline. Almost every performance metric has taken a hit, according to Defillama data.
At the end of 2021 and the beginning of 2022, daily transaction volumes were around $4 billion on average. However, this average has significantly dropped to about $1.5 billion in the past few months, indicating a notable decrease in crypto activity. Despite the decline, Ethereum liquid staking platform Lido continues to be the largest project, accounting for $14.10 billion of the TVL.
Lido Remains at the Top
Lido has seen consistent growth in TVL since its launch, with the exception of a brief drop during the depegation of Terra UST. Even the Shappella upgrade, which allowed for the withdrawal of Stacked ETH, failed to hinder the protocol’s growth. On August 31, the platform reached a historic milestone with the locking of 8.61 million ETH.
However, MakerDAO, with the second-highest TVL of $5.07 billion, recorded significant drops in dollar and ETH TVL. The same is true for other lending and decentralized exchange protocols such as Aave, JustLend, Uniswap, and Curve Finance. Compound Finance, once one of the leading DeFi protocols in terms of TVL, fell to 11th place last month after its TVL dropped by 17.87%.
Conclusion
The crypto winter has had a chilling effect on the DeFi ecosystem, with the total value of locked assets dropping to a two-year low. Despite this, some projects like Lido have managed to maintain their positions. As the market continues to fluctuate, it remains to be seen how these projects will adapt and evolve.
