In what seemed like defi heading for another hot summer, instead felt the burn of the market-wide sell off.
It world of decentralized finance has been one of the biggest drivers of the surge in the broader cryptocurrency market over the past few months. However, the space has taken quite the beating after the series of massive corrections unfolded in the market last week.
According to the most recent DeFiLlama stats, the total value locked [TVL] across all decentralized finance platforms tumbled from an all-time high of $164.2 billion on May 10th to $95.5 billion two weeks later.At the time of writing, the TVL value had noted minor recovery and was found to be at $102.9 billion. However, it was still down by more than 37% in a period of fewer than two weeks.
It all started with Tesla Technoking, Elon Musk blocking Bitcoin payments which sparked the first major instance of sell-off. Bitcoin also suffered a setback after the hackers of Colonial Pipeline siphoned off with $90 million in a BTC ransom. In addition, China’s back-to-back reports on crackdowns of the cryptocurrency space further proved damaging.
DeFi tokens crumble
The crash in the defi space’s TVL is a result of the depreciation in the value of the tokens. The correction in the market has hit investors hard, especially the newer cohort, most of whom forayed the ecosystem at the beginning of the bull season that started late last year.
Over the past week, these tokens have tanked way more than Bitcoin [BTC] and Ethereum [ETH]. Top tokens such as Uniswap [UNI], Chainlink [LINK], Aave [AAVE], Maker [MKR] was still down by more than 45%, 40%, 44%, and 24% respectively.
Several projects on the decentralized finance space this quarter either pulled the rug or executed an exit scam or suffered a flash loan. These were especially observed on multiple Binance Smart Chain protocols which further added to the investors’ woes.