Analyst says DeFi and stablecoins held up and crypto markets imploded
The decentralized finance (DeFi) industry faced its first real challenge during last week’s market liquidation, which saw more than $ 1 trillion wiped out of the global cryptocurrency market capitalization as traders were feverishly running for the safety of stablecoins amid falling prices.
Despite a rapid decline in token prices, the nascent DeFi industry held its own as decentralized exchanges posted a record trading volume of $ 11.7 billion on May 19. Uniswap (UNI) led with $ 5.7 billion in volume, followed by SushiSwap (SUSHI) 24 hour trading volume.
According to Glassnode’s recent DeFi Uncovered report, top-notch DeFi tokens including UNI, SUSHI, Maker (MKR), Aave (AAVE) and Compound (COMP) have largely reflected the decline of Ether (ETH) over the years. last two weeks. , “Showing a relatively high beta for ETH but not exceeding the decline of ATH by more than 15% compared to the decline of ETH.”
New users increase despite the drop in TVL
The decline in prices, combined with the removal of cash by users and the conversion to stablecoins, resulted in a 42% drop in the total value locked in smart contracts, which also closely followed the decline in the price of Ether.
TVL is intrinsically tied to the underlying value of deposited tokens and given that Ether is one of the main tokens locked on DeFi platforms, TVL’s decline has less to do with users withdrawing funds and is mainly related to the fall in prices.
Throughout last week’s downturn, the percentage of Ethereum’s supply stuck in smart contracts remained above 23% while the supply on exchanges “rose from 11.13% to 11.75 % ”.
Despite the price drop, new users continue to enter the DeFi ecosystem, and the total number of unique 30-day traders on top DEXs broke the million mark for the first time in the middle of the week’s sale. last.
Uniswap is the clear leader with 815,000 unique users between April 24 and May 23, while 1 inch (1 inch) came in second with 78,200 users and SUSHI was third with 10,900 users.
Stable pieces hold their ankles
Much of the strength seen in DeFi when selling can be attributed to the healthy stable currency market and the ability of major stable coins such as USD Coin (USDC), Tether (USDT), and Dai (DAI) to maintain. their peg to the dollar “for most of the crash, with volume weighted average prices (VWAP) remaining at $ 1.00 most of the time.”
DAI’s performance was rated as “particularly positive for DeFi” according to Glassnode, as its circulation supply was able to adjust accordingly in response to warranty requirements and protocol stability. The report also pointed out that the recovered collateral and DAI were removed from the offering as redemptions were claimed by collateral holders.
“This behavior allows collateral to remain healthy, liquidations remain at a healthy level and DAI to maintain its anchoring.”
The only stable coin that struggled to maintain its anchor was TerraUSD (UST), which lost its anchor on May 18 as the value of its collateral with LUNA fell below that of the stable coin it guaranteed. This led to “unhealthy behavior in its Anchor Credit Market (ANC),” resulting in an above-average number of liquidations on the protocol’s native lending platform.
Overall, stablecoins served their intended function and pegs remained stable across the ecosystem, with on-chain stablecoins transfer volume reaching a record $ 52 billion at the height of the sale.
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