Over $80 Billion Erased from the Decentralized Finance (DeFi) Market Amid Terra (LUNA) Collapse

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The decentralized finance market was also not spared following the Terra ecosystem tokens collapse.

The collapse of Terra ecosystem tokens TerraUSD (UST) and LUNA had a major impact on the entire cryptocurrency market, including the decentralized finance (DeFi) sector.

With UST losing its peg to the dollar due to the mouth-watering rewards attached to Terra’s Anchor program, DeFi investors who mostly borrow and lend crypto assets fear that a similar fate may befall their favorite digital currency.

Large Movement of Funds from DeFi protocols

As part of efforts to save themselves from seeing their favorite crypto project collapse like in the case of Terra, there has been a large movement of funds from various DeFi protocols in recent weeks.

According to data on DeFi tracking platform DeFi Llama, the total value locked (TVL) across various protocols plummeted to $112 billion from $195 billion in the aftermath of Terra ecosystem collapse.

A quick look at MakerDAO, the largest DeFi project by total value locked, shows that the platform has seen the volume of its asset locked dip by over a third in less than a month to $9.7 billion.

A similar event was recorded for the second-largest DeFi platform dubbed Curve, a protocol that enables users to swap stablecoins at a negligible fee.

Per data on DeFi Llama, the total value locked on Curve plummeted by over 55% to $9 billion.

Commenting on the decline in the volume of TVL, Kaiko, a cryptocurrency research firm, noted that the reason why staking in DeFi protocols has been on the decrease in recent times is because of the massive capital outflows from the cryptocurrency space.

“Fear is rampant. And you’d have to look long and hard to find a bullish investor across any risk asset,” Jeff Dorman, Arca’s Chief Investment Officer, said in a report published by Bloomberg.

Cryptocurrency Market Suffers Huge Losses 

Aside from the DeFi space, the entire cryptocurrency market has also suffered huge losses. Over $1 trillion has been wiped out of the entire market since the unfortunate incident with Terra started.

Bitcoin saw its value plummet to below $27,000 from nearly $40,000, while Ethereum (ETH) also plunged below $1,800.

With the massive losses investors have suffered over the past week following the Terra ecosystem collapse, many feared widespread capitulation would be recorded in the crypto space.

Meanwhile, the IMF Managing Director recently urged cryptocurrency investors not to flee the industry as the market has become a pivotal aspect of the global financial industry.

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Source: https://thecryptobasic.com/2022/05/24/over-80-billion-erased-from-the-decentralized-finance-defi-market-amid-terra-collapse/?utm_source=rss&utm_medium=rss&utm_campaign=over-80-billion-erased-from-the-decentralized-finance-defi-market-amid-terra-collapse