Value tied up in decentralized financial protocols (DeFi) hit a 2022 low over the weekend amid a general sell-off in global markets and waning interest in risky assets like cryptocurrencies.
Data from tracking service DeFi Llama shows that DeFi minutes held a total of $177.6 billion on Monday, a 29% plunge from December's high of $252 billion. The data shows that about $27 billion in locked value was lost this weekend alone.
Stablecoin swap platform Curve, the largest DeFi protocol by total blocked currency value (TVL), saw a drop of nearly 10% last week. Staking service Lido saw a 13% decline, while Terra's Anchor saw a 21% drop as the TerraUSD (UST) token temporarily lost its peg to the US dollar over the weekend.
A number of tokens saw large declines over the past month. DeFi aggregator Instadapp suffered a 43% TVL decline, credit protocol Aave lost 22%, while cross-chain liquidity tool Stargate lost as much as 60% of its TVL.
Some analysts explained that part of the decline was due to the falling prices of the underlying tokens.
"The decline in DeFi TVL that we are currently seeing is mainly caused by the general downward trend of the market - on the one hand, many assets stored in DeFi tokens are very volatile and their value decreased as the market plummeted," Kate Kurbanova, co-founder of risk management platform Apostro, said in a Telegram message.
"On the other hand, we should expect the fear that usually accompanies the downtrend and people exiting their (volatile) positions in stablecoins or fiat - which also drives value away," Kurbanova continued.
The drop in TVL comes as April saw a drop in revenue on the DeFi platform compared to March. This revenue is generated every time a user trades, lends or performs other activities, with the protocol taking a small portion of the volume as fees.
Financial services platform SushiSwap saw a 29% drop in revenue, while DeFi exchange Balancer's revenue fell as much as 66%, according to reports. Curve (CRV) and Uniswap (UNI) were the only DeFi projects to report an increase in revenue. Curve earned 51% more in April than in March, while Uniswap earned 13% more.
Tokens in the broader DeFi sector lost 34% on average, making it the worst-performing crypto sector. The Memecoin sector, by comparison, lost only 16% and proved to be a better bet for investors betting on memes rather than sophisticated technologies.