DeFi protocols were buzzcut as their token values plummeted as well as the total value locked on all platforms fell to levels not seen since April.
Cryptocurrency investors are still picking up the bits from the May 19 market-wide implosion which saw Bitcoin (BTC) drop to an unexpected reduced at $30,000. Post-mortem analysis now indicates that the correction catalyzed a crazy dash among investors running for the exits as the cascading sell-off resulted in a listing 10,525 BTC liquidated across all exchanges.
Altcoins were quick to follow suit as they combined Bitcoin in its own dip and barely a token was left unscathed from the downturn as a wider-sell-off rippled across the market, leading to a $437 billion haircut to the total market capitalization to $1.672 trillion, its lowest level since April 25.
Decentralized finance (DeFi) took an especially hard hit as many of the lending protocols provide flash loans and other forms of leverage to users.
Together with Bitcoin and Ether (ETH) accounting for a large portion of the funds locked on such protocols, their quick cost declines resulted in a similar decrease in TVL across the DeFi industry that fell by 21.5% to $114.15 billion according to data in Defi Llama.
The AAVE lending system, which is currently the highest-ranked DeFi platform concerning TVL based on DeFi Llama, saw its own TVL reduction by 16% along with a 26% decline in the price of AAVE token to $460.
And it wasn’t only the DeFi lending systems which took a hit. Uniswap, the top-ranked decentralized exchange (DEX) saw its TVL decrease by 17.4%, while its token worth dropped 26 percent to $25.60, its lowest level since the start of March.
SushiSwap (SUSHI) and PancakeSwap (CAKE), Uniswap’s direct competitors, experienced similar declines in TVL in addition to token prices, together with the purchase price of CAKE decreasing by 25 percent and SUSHI collapsing by 30%.
Of course, no industry recession would be complete without some nefarious celebrities becoming involved as was the unfortunate instance for the Binance Smart Chain-based Venus (VXS) lending stage. The protocol endured a series of cost manipulations that resulted in more than $200 million worth of DeFi liquidations and over $100 million worth of bad debt on the protocol.
As a consequence of the assault and the overall market recession, XVS cost dropped 50% to indicate a swing low at $55 and the entire value closed on the protocol decreased by 46 percent.
In the span of a few days, the market went from chatter about the possibility of this’summer of DeFi 2.0′ to blood to the streets and concerns of an impending multi-year bear industry. This is just the most recent example of why investors shouldn’t get too comfortable in the crypto market because circumstances may change at the drop of a hat.
Despite the current downturn, DeFi’s transformational travel to reshape financial markets is just beginning and this correction may pose a rare bull-market buying opportunity for people who are brave enough to recall Warren Buffet’s famous line that urges investors .
