Ethereum saw a further drop in total value frozen within days of the highly anticipated “Merge” due to a continuing decline in the amount of liquidity poured into decentralized finance (DeFi).
Ethereum has been the go-to blockchain for thousands of developers and millions of dApp users since decentralized finance was coined by a group of Ethereum entrepreneurs and developers in 2018.
An overall bearish market that followed the new milestones reached in 2021 at the beginning of the year extended to the third quarter of the year. Unfortunately, Ethereum as the DeFi industry leader was not spared as the chain lost 7% of its locked opening day value.
On August 1, Ethereum TVL was at $ 37.32 billion and on the last day of the month it dropped to $ 34.36 billion, according to data from DeFiLlama.
Ethereum TVL drops more than $ 60 billion from the peak of the year
After reaching new highs in 2021, Ethereum made several attempts to keep bears at bay in January, when it hit an annual high of $ 100.99 billion.
TVL by the end of August was more than twice below this statistic. To put it simply, Ethereum has dropped $ 66.6 billion in the past eight months.
Ethereum TVL largely depends on dApps
Like other smart contract chains such as Solana, TRON, Binance Smart Chain, Avalanche, and Fantom, Ethereum’s total locked down value is primarily determined by the performance of decentralized applications hosted in its ecosystem.
MakerDAO, the largest dApp on Ethereum, lost 5.21% of its stuck value at around $ 8 billion. Lido, a liquid staking protocol with over $ 6 billion blocked, lost 1.8% of its value. Decentralized exchanges (DEXs) like Uniswap and Curve Finance were not spared.
Uniswap, the largest DEX by trading volume, recorded volume of less than $ 40 billion for the second consecutive month reaching around $ 39 million in August.
Over the same period, Curve Finance hit an annual low of around $ 6 billion, data from Dune Analytics showed.
AAVE, one of the most popular dApps, fell 2% to around $ 4.6 billion, while the Convex Finance yield protocol and Compound lending platform plummeted 4% and 8.32%, respectively.
Balancer and Frax were the only positives as they added over 9% to their respective locked value.
Ethereum remains the king of DeFi despite a drop in liquidity
Despite a drop of more than $ 60 billion in TVL since January 5, Ethereum continues to maintain its lead over other blockchains despite the number of implementations that dApp developers have made on more scalable networks.
Projects such as Polygon, Avalanche, TRON, Solana, and Binance Smart Chain have gained a significant share of the DeFi market due to the scalability problem associated with Ethereum’s dependence on the old Proof-of-Work (PoW) network.
While the market remains unprofitable for many due to the collapse of several projects that lack the infrastructure needed to compete, the move to a Proof-of-Stake (PoS) network could see a resurgence in the amount of liquidity poured into Ethereum dApps. .
Ethereum tested $ 2,000 again in August
Ethereum’s native asset, ETH, has struggled for the past three months after undergoing several price corrections and resistance levels.
That said, the coin crossed $ 2,000 for the first time since the last days of May. It ultimately hit a monthly high of $ 2,022.79 on Aug. 14. After fending off a steep drop in its price, ETH hit a monthly low of $ 1,427.73 on Aug 29. Throughout August, Ether was down 7% from $ 1,681.45 on August 1 to $ 1,553.68 on August 31.
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