DeFi Outlook Amidst the Worse Crypto Market Crash in 5 Months


The digital currency ecosystem witnessed its worst crash in 5 months with Bitcoin (BTC) plunging as low as $34,820.78, a level not seen in months. With altcoins going on a massive price freefall, the broader crypto market capitalization is now currently pegged at $1.64 trillion, a level far below the benchmark $2 trillion that characterizes a healthy ecosystem.

DeFi Resilience and General Outlook

While there are trickles of revival in the market, the decentralized finance (DeFi) ecosystem is seeing a very broad resilience. The Total Value Locked (TVL) in DeFi platforms according to data from the market aggregator, DeFiLlama, is pegged at $199.53 billion, down from the $249.93 billion recorded at the beginning of the year. 

DeFi TVL Locked Trend. Source: DeFiLlama

The plunge in the DeFi TVL has not been as aggressive as expected, as many investors still consider the yield farming and the potential benefits it brings. Rather than keep one’s funds depreciating per the ongoing market dip, the DeFi market gives good returns on savings, staking, or other investment measures.

Ethereum based DeFi protocols ranks as the most valuable DeFi projects with over $118 billion in Total Value Locked. Per the DeFiLlama data, Curve Finance (CRV), a decentralized exchange liquidity pool on Ethereum designed for extremely efficient stablecoin trading, occupies the top niche with $17.18 billion in TVL. 

Binance Smart Chain (BSC) protocols brandish a TVL of $12.06 billion with PancakeSwap being the dominating protocol with $4.1 billion in total assets locked. Other prominent and growing protocols including the Terra ecosystem are also brandishing a relatively stable TVL currently worth $16.61 billion. 

With the DeFi market stable relatively stable across the board, investors can be sure that their expected profit will be doubled with the broader market resurgence.

Bitcoin and DeFi Ecosystem Under Threat

Part of the reason why both the traditional and the crypto market is plunging is because of the anticipation of an increase in interest rate by the United States Federal Reserve, a major macroeconomic move that can be inked as early as this week. With interest rates back up from the 0% that it has been since the beginning of the pandemic, investors are likely to take out funds from the DeFi ecosystem and pump into more relatively stable and regulated assets.

The fears of this happening account for one of the reasons why the Bitcoin and broader cryptocurrency ecosystem is tanking, and innovators in this nascent world will have to recreate such offerings that will convince investors that the ecosystem is a safe investment ground, barring many hacks that have been recorded recently, and that the benefits they get here cannot be rivaled anywhere else.

Godfrey Benjamin
I'm just a nerd who wants the world to know about the unique capabilities of blockchain and digital currencies

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