Decentralized Finance (Defi) Market In A Freefall As The Industry Reacts To Coronavirus Effects


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Decentralized Finance (Defi) Market In A Freefall As The Industry Reacts To Coronavirus Effects

  • DeFi’s ETH volume drops to yearly lows.
  • CoronaVirus part in the DeFi capitulation?

The total amount of Ethereum (ETH) locked in decentralized finance applications is on a slide as CoronaVirus pandemic bites across the globe. According to DeFi Pulse, a DeFi data aggregator, the capitulation of ETH locked in these financial products is now at its lowest point in 2020 signaling a bearish scenario for the industry and ETH.

A deeper look into what is causing the dip, Maker’s recent failings and possible effects of COVID-19 on the global trade and economy stand out.

DeFi’s ETH volume drops to yearly lows

The year started on a high in the crypto field and decentralized finance apps were no different. The total value locked (TVL) in Defi apps across the industry hit an all-time high at $1.239 billion on February 15th with Maker, Synthetix and Compound – top lending apps led the way. However, since the massive “Black Thursday crash” a month ago, the TVL has dropped by 42.5% to current levels at $712 million.

Image: DeFi Pulse

The volume also grew in the number of Ether stored, hitting an all-time high of 3.235 million ETH on February 5th. However, since then the value stored on DeFi platforms has collapsed with the CoronaVirus and Maker’s failings contributing heavily to the fall.

At the height of Maker’s crash – which saw over $8 million in ETH auctioned for zero dollars – on Mar.13, the ETH in DeFi markets plummeted over 46% to $558 million in a week.

Notwithstanding, the effects of COVID-19 on global economies has seen consumer behavior change rapidly

CoronaVirus part in the DeFi capitulation?

Over the past three weeks over 10 million Americans have filed jobless claims showing the devastating effect of the COVID-19 pandemic. The ‘Great Lockdown’ moreover is causing the closure of thousands of small businesses across the globe – the backbone of the DeFi ecosystem – which is associated with the low lending and borrowing volume on the platforms.

In times of a crisis, cash is the most preferred medium of exchange a fact that pushes investors to liquidate their assets to ensure survival during the tough times. The ease of selling cryptocurrencies across the world makes it the most favorable asset for most investors to sell in times of need. Could this be the cause of the comparatively low volumes on DeFi lately?

Despite the freefall in DeFi volumes, the field looks like the greatest thing out of the cryptocurrency field after Bitcoin and it may be only a matter of time before the industry recoups its all-time high volumes once again.

Author: Lujan Odera
Been in the field since 2015 and he still love everything blockchain and crypto! FC Barcelona fan. Author and journalist. Follow him at @lujanodera.
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Lujan Odera 385 Articles
Been in the field since 2015 and he still love everything blockchain and crypto! FC Barcelona fan. Author and journalist. Follow him at @lujanodera.
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