The total value locked in DeFi fell by more than 20% within 4 days.Miners sold or platform tokens were cashed out?

The total value locked on DeFi platforms has taken a huge hit over the past week. This is a 20% drop from its peak of $8.41 billion on September 2, 2020.

This marks the first major correction for a DeFi protocol, a period of moderation following unprecedented growth fueled by a slew of new products, namely liquidity mining.

A year ago, the total lock-up volume of DeFi exceeded US$1 billion for the first time, and the current top ten protocols all exceeded this data: DeFi Pulse tweeted that today, about a year ago, the total lock-up volume (TVL) of DeFi exceeded US$1 billion for the first time . Now, the total lock-up volume of DeFi exceeds 33 billion US dollars, and the TVL of a single protocol needs to be at least 1 billion US dollars to rank among the top ten of DeFi Pulse. [2021/2/8 19:12:13]

The reduction amounted to more than $1.6 billion. It fell to $6.75 billion in just 4 days from a high of $8.41 billion on September 2.

There are currently two theories in the crypto world as to why the price of Bitcoin fell so quickly that it dragged down the entire industry. First, bitcoin miners suspected of originating from China sold their bitcoins on various crypto exchanges.

Biying will launch BART in the DeFi zone at 20:00 on August 16: According to official news, Biying will launch BART in the DeFi zone at 20:00 on August 16, open the BART/USDT trading pair, and open the "recharge instant Send candy, -0.1% Maker rate" activity; it is reported that the Bartertrade project is a decentralized exchange, which aims to lower the barriers for users to use decentralized exchanges, and BART tokens can be used to exempt part of the handling fee. [2020/8/16]

Second, the price of Bitcoin is known to be highly correlated with traditional stock markets, which have experienced considerable losses over the past week. Especially tech stocks like Tesla and Apple.

Opinion: Regulators are likely to crack down on DeFi firms that break the law: The SEC and CFTC announced they have fined crypto firm Abra. In this regard, Josh Garcia, a partner at Ketsal, a law firm engaged in cryptocurrency regulation, said, "As market forces exclude DeFi from relative obscurity, it is practical for regulators to take notice and take severe action against companies that violate the law. Here is their job description." (Decrypt) [2020/7/15]

Ethereum, the leader in DeFi, has been affected by the drop in Bitcoin’s price due to its close correlation with Bitcoin, causing further volatility. Probably the most logical reason for liquidity miners to sell massively is that they want to keep as much profit as possible.

Source: CoinGecko

The correlation between the falling price of Ethereum tokens and the TVL of Ethereum DeFi protocols shows why the aTVL (Adjusted Total Value Locked) metric launched by DappRadar will become a vital indicator for the DeFi industry.

TVL, or total value locked, is used to measure the amount of funds that appear in the smart contract of the project. It is similar to deposits and reserves in traditional industries. Its metric is TVL = A * P, which is the number of tokens multiplied by the current price of those tokens.

It is easy to think of situations where the number of tokens remains the same or even decreases. But TVL has increased due to price increases. This is why the TVL metric can be misleading to people.

Take Ethereum as an example. It is accepted as collateral by many DeFi dapps and accounts for a significant portion of their total value. Over the past 90 days, the price of ETH has increased significantly. This, in turn, is reflected in the TVL of the project that accepts it.

Now, we see the opposite effect when the price of ETH falls. This further validates our point of view and establishes the necessity of aTVL.

As can be seen from the aTVL and TVL on September 7, 2020, the drop in TVL was not caused by users withdrawing their locked funds. It's because of the drop in token prices.

With SushiSwap’s Chef Nomi admitting to selling his SUSHI token holdings, speculation was further raised that the price of SUSHI tokens would drop. Nomi claimed that he did it for the community, comparing his sale of SUSHI tokens to that of Li Qiwei (Charlie Lee) selling Litecoin.

Such an exit from Nomi could accelerate the withdrawal of investors from DeFi platforms. That's because of growing fears that other program managers will do the same.

Tags：

OKX Exchange App Download