Ethereum Staking Is Booming—But Value of DeFi Assets Keeps Falling

A slew of failures of centralized crypto exchanges and services over the past year has done little to stem consistent outflows from decentralized finance (DeFi) during that time, data shows.

According to DefiLlama, less than $38 billion in value remains locked within DeFi protocols across chains, down from $178 billion at the industry’s height in November 2021. Almost $21.8 billion of that is currently held in Ethereum protocols.

The overall figure even falls short of the ~$40 billion in total value locked (TVL) in DeFi shortly after centralized exchange FTX collapsed in November 2022, which cratered the amount of many assets locked within such protocols to a two-year low at the time. Centralized crypto lenders including BlockFi, Genesis, and Gemini Earn also collapsed amid the surrounding contagion.

Though TVL rose back to roughly $50 billion in April as the market recovered, the metric quickly retraced below $38 billion despite its underlying crypto values sliding relatively little over this period.

The $37.6 billion figure does not include funds locked in popular liquid staking protocols like Lido, which has more than doubled its TVL from $6 billion to $13.95 billion since FTX fell apart. As DeFiLlama notes, such protocols “deposit into another protocol,” so it’s not counted in that tally.

Similarly, after launching in September 2022, Coinbase’s staking service has accumulated an additional $2.1 billion worth of ETH. In total, such services contain another $20.2 billion in assets alone.

Liquid staking allows investors to stake their assets and earn yield, while still having access to trading liquidity through pegged assets issued by the staking provider (such as cbETH and stETH).

This can be a more attractive alternative for investors than using a lending protocol like Aave, which forces users to lock their tokens and possibly be subject to unwanted protocol risk. At present, Aave’s ETH and USDC yield rates are 1.63% and 2.43% respectively, versus Coinbase’s 3.65% ETH staking rate, and 4.5% USDC rate.

Aave’s total value locked has fallen 21% over the past month to just $4.5 billion, while Curve Finance has slid 26% to $2.3 billion.

Outside of DeFi, the United States Federal Reserve’s hawkish monetary policy has driven up yields on short-term government debt, potentially looking more attractive to investors than what stablecoin yields can offer.