It was somewhat to be expected, but the total value locked in DeFi is on the decline. After hitting the $12 billion milestone, the industry has cooled off significantly. As a result, there is now less than $11 billion in TVL, and the downtrend may not relent.
DeFi TVL Reverses Course
Following a few months of a genuine DeFi “craze“, it seems most users are slowly coming back to their senses. There is no shortage of decentralized finance services and protocols. However, they are still primarily fishing in the same Ethereum pond. Slowly but surely, people are moving their funds elsewhere, and out of unaudited smart contracts.
This decline is not entirely new either. Despite hitting over $12 billion in TVL not too long ago, it seems the overall interest in DeFi is decreasing. Whether this is due to Bitcoin’s price rising, is always difficult to gauge. Ethereum’s value has certainly taken a hit, which can explain a decrease in total value locked.
At the same time, there are quite a few platforms noting a decrease in TVL over the past 24 hours. Uniswap is losing some liquidity, which is always possible. Aave and Synthethix, as well as Balancer and C.R.E.A.M Finance are dropping a bit as well. Very interesting developments, considering how other platforms are moving up the rankings.
Keeping all of the above in mind, the coming weeks will prove crucial. The DeFi industry can easily overcome a minor dip like this. However, there is also the psychological angle to take into account. When people see a “support level” such as $11 billion disappear, there will undoubtedly be some doubt.
Decreasing ETH Inflow is a Factor
Looking at a slightly different statistic, there is a key change in the amount of Ether being locked into DeFi. September saw massive growth, as the ETH TVl went from 5 million to almost 9 million ETH in quick succession. Ever since, the value has remained between 8 and 9 million, but is now showing signs of sloping down again.
This number does not represent the value in Ether, though. It is merely the amount of Ether itself being deposited into DeFi protocols’ smart contracts. When that number declines, and the Ethereum price does too, the TVL cannot remain afloat above $11 billion. The current outlook is clearly a combination of different factors.
Speaking of the Ethereum price, it remains well below $390. Surprising, considering one Ether was valued at $405 not that long ago. With a 2.7% decline in the past week, there is a bug hurdle to overcome. Despite this dip, Bitcoin keeps the total cryptocurrency market cap above $400 billion, at the time of writing.