DeFi Market Cap Crashed By 75% But User Activity Is Doing Better

The DeFi market cap crashed by 75% but it seems that the user activity is doing much better despite the crash so let’s have a closer look at our latest cryptocurrency news.

Along with the market crash, Defi protocols saw bigger declines in trading volumes, prices, and much more. The first half of 2022 was quite rough for the crypto investors and the market was still bleeding so investors were gathering the losses as the DeFi market crap crashed by 75% during the second quarter of the year. The crypto data from CoinGecko shows that the DeFi sector went off the edge beucase of Terra’s collapse. Because of its partnership with interoperability protocols, the crash initiated a huge chain reaction that affected each project that supported the digital assets.

Terra’s $60 billion collapse impacted the entire crypto industry with the Defi market cap dropping from $142 million to $36 million in a few months. CoinGecko outlined that the recent surge in Defi-related hacks exacerbated the market drop and undermined investors’ confidence in some protocols. The report cited that the ETH-based DeFi protocol Inverse Finance was hacked twice in three months and the attackers managed to steal over $17 million worth of crypto.

The reports also show that the attack on Rari Capital exploited got exploited for over $80 million in May. CoinGecko’s report said:

“These attacks have negatively impacted token prices as investors lose faith in these hacked protocols.”

Despite the reduction in DEfi on-chain activity, the report noted that the sector retained most of the users. The total daily active users dropped by 34% from 50,000 to below 30,000 users in the second quarter and there were certain instances where this activity saw a massive spike. The first was in May during the Terra collapse and thousands of Defi users flocked to the DEX exchanges like Uniswap and Curve Finance to sell their UST and LUNA tokens with many centralized exchanges halting the trading of these assets. As a result, the trading volumes on the DEXs surged.

The second one was in June when the lending platform Celsius imposed withdrawal restrictions on the users and the traders headed to the DeFi protocols to enjoy permissionless transactions which caused the daily active users of the protocols to surge by 24%. The report outlined that lending decentralzied exchanges like Uniswap maintained its position as the biggest DEX in the quarter and amassed more than half of the total spot volume that was traded. The DEX spot volume dropped to $274 billion from the $466 billion that was recorded in Q1 as Uniswap controlled 60% of the market share on the chains.