The decentralized finance (DeFi) landscape faced a challenging month in August as exchange volume dipped 15.5% to settle at $52.8 billion — led primarily by a decline in some of the most dominant DeFi tokens, according to data from investment manager VanEck.
VanEck’s report also touched on global interest rates, especially in the U.S., and their pressure on stablecoins. August saw a 2% decline in the total market capitalization of stablecoins, which stood at $119.5 billion at the end of the month.
The firm associates this drop with rising interest rates in conventional finance, prompting investors to transition from stablecoins to money market funds, enticed by an approximate 5% risk-free yield.
DeFi dip
The figures in the report were taken from VanEck’s MarketVector Decentralized Finance Leaders Index (MVDFLE), an index that monitors the performance of the most prominent and liquid tokens in the DeFi ecosystem.
Some major tokens, including Uniswap’s UNI, Lido DAO’s LDO, Maker’s MKR, Aave’s AAVE, THORChain’s RUNE, and Curve DAO’s CRV experienced significant decreases, affecting the overall health of the market.
The DeFi index lagged behind digital currency giants, Bitcoin and Ether, in August, dropping by a notable 21%. This decline was further intensified by the Uniswap token, which plummeted by 33.5%, as many investors opted to offload their tokens, seeking to realize gains made the previous month.
On a broader scale, the DeFi sector’s total value locked (TVL) saw an 8% reduction, falling from $40.8 billion to $37.5 billion — narrowly outpacing Ethereum’s 10% downturn during the same period.
In contrast, several optimistic indicators emerged in August, including the successful dismissal of a class-action lawsuit against Uniswap Labs and the noticeable growth of stablecoins, especially with Maker and Curve.
Curve Finance
Curve Finance, which had been grappling with the aftermath of a severe exploit in July, witnessed its stablecoin crvUSD attain a record high with $114 million borrowed in August. Despite its promising rise, Curve Finance’s governance token CRV failed to show a significant recovery post-exploit, losing 24% of its value in August to close at $0.45 at the end of the month.
A notable mention in the VanEck report centered on the performance of the CRV token. The document highlighted concerns surrounding the declining value of the CRV token, with potential relief only in sight if the growth of crvUSD compensates for the dip in DeFi volume.
Adding to the market concerns was Curve Finance founder Michael Egorov’s significant debt, backed primarily by the CRV token. After a near 30% drop in the CRV token value following the hack, worries over a potential liquidation of Egorov’s collateralized loan triggered fears of a ripple effect in the DeFi sector.
In an attempt to reduce this debt, Egorov offloaded 39.25 million CRV tokens to a group of prominent DeFi investors.