Chilly Crypto Winter: DeFi Total Value Locked Slumps to 2-Year Low

The crypto winter has a chilly effect on the DeFi ecosystem, with the total value of assets locked in the space falling to its lowest level in over two years.

After a series of price slumps in the past few weeks, DeFi TVL has dropped to $37.7 billion, according to DeFillama data. This is the lowest for the sector since February 9, 2021, when the TVL was $37.172 billion.

DeFi TVL Declines

This decline represents a massive fall from the peak of $175 billion recorded in November 2021. At the time, most altcoins were trading at their peak price. With many cryptocurrencies, including ETH, now down more than 60% from their peak price, the TVL has also collapsed.

DeFi TVL Falls. Source: DeFillama

However, other factors have also contributed to DeFi’s decline. According to defillama data, almost every performance metric has taken a hit with only a few bright spots. 

In late 2021 and early 2022, daily transaction volumes averaged around $4 billion. However, over the past few months, this average has significantly dropped to approximately $1.5 billion, signifying a notable decline in crypto activity.

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Lido Remains Dominant

Despite the decline, Ethereum liquid staking platform Lido remains the biggest project, accounting for $14.10 billion of the TVL. Lido had seen consistent growth in TVL since launch except for the brief decline when Terra UST depegged.

Ethereum Lido
Lido DeFi TVL. Source: DeFillama

Even the Shappella upgrade, which enabled the withdrawal of staked ETH, failed to hinder the protocol’s growth. On August 31, the platform achieved a historic milestone, with a staggering 8.61 million ETH locked.

Meanwhile, MakerDAO has the second-highest TVL at $5.07 billion. It has recorded major declines in its dollar and ETH TVL. The same applies to other lending and decentralized exchange protocols such as Aave, JustLend, Uniswap, and Curve Finance.

Compound Finance, once one of the leading DeFi protocols in TVL, has also dropped to 11th after its TVL fell 17.87% in the past month.

Base Gaining Momentum

While DeFi appears to be struggling, Coinbase layer-2 network Base has seen its TVL rise significantly since its launch last month. The network now has a TVL of $388.71 million, higher than that of several Layer-One networks, including Solana.

Base TVL Climbs. Source: DeFillama

The leading protocol on the network is Aerodome DEX, with a TVL of $187.54 million. Other popular DeFi protocols such as Uniswap, Compound, and Curve DEX have also launched on it.

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