The decentralized finance (DeFi) market has been hit hard by the recent downtrend in the crypto market. The space that had been the star of 2021 had quickly started to lose all the value accumulated during the bull market. This was the result of major events that triggered the various accidents. In the past month alone, DeFi TVL has shrunk so much that it is now below $100 billion for the first time in over a year.
DeFi TVL drops to 15-month low
The total value locked (TVL) in the decentralized finance (DeFi) space had peaked at over $250 billion at its peak last year. It mostly maintained the majority of that value even through the dips and crashes that would rock space months after that. However, the low momentum trend of 2022 also trickled down to the DeFi space, causing it to lose the vast majority of its TVL.
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Total DeFi TVL currently sits at $71.35 billion locked across all networks. Considering that less than eight months ago this figure was $250 billion, this is an alarming decrease. The last time the TVL was this low was in April 2021, when the space was still gaining momentum. This means that DeFi TVL has fallen by more than 68% in the last year alone.
TVL drops 35% in one month | Source: DeFiLlama
The last few months have been particularly brutal for the market, with double-digit percentages. In the past month, TVL is down 35%, losing over $30 billion in TVL over the same period.
Rise and fall of financial decentralization
The main appeal of the DeFi space was the fact that it was not under the thumb of any of the banks or financial institutions that currently control the traditional financial market. Given this, users might get services that they usually couldn’t get due to their financial drive. The space had grown rapidly as this sentiment spread among small and large investors alike.
Total market cap drops to $41 billion | Source: DeFi market cap chart from TradingView.com
However, the decoupling from traditional finance meant that DeFi investors were unaware of the security measures that protected traditional finance investors. This has led to a number of harrowing events in space.
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One of them is the decline and eventual collapse of the Terra network, where thousands of crypto investors found themselves with billions of dollars in losses. Another has been the cessation of withdrawals and transfers on the Celsius network, as many await the inevitable liquidation and bankruptcy announcements.
Most problems in space are due to the lack of regulations that protect space. For this reason, it is assumed that the recent stock market crash will lead to renewed interest from regulators whose job it is to provide safety measures for investors.
Featured image from Financial Times, chart from TradingView.com
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