DeFi Lending Sector Saw Massive Investor Exodus After Market Meltdown

The DEFI lending sector saw a massive investor exodus after the recent market meltdown which has yet to be fully realized so let’s read more about it in today’s latest cryptocurrency news.

The DeFi lending sector saw a massive investor exodus and even the analytics company DappRadar released a report on the situation which doesn’t look pretty. The company reproted that the DeFi total value is down by 40% over the past week. It stated that the crash had been caused by investors that flipped tokens into stablecoins in preparation to cash out into fiat but the huge slump in token prices will have impacted TVL as a double-based figure. At the time of writing, DappRadar remorted a nominal TVL of $83.4 billion which is a dump of 48% since the start of the year.

🔥 Total value locked in key lending protocols is dropping as investors started flipping tokens to stablecoins with the intention of cashing out to fiat. @terra_money @AaveAave

➡️ Read More: https://t.co/rSbwkS3lnk

— DappRadar (@DappRadar) May 14, 2022

The report stated that the collapse of the Terra stablecoin and the LUNA token sent shockwaves via the dEFI ecosystem. Amidst the massive concerns for Terra, LUNA, and UST so traders seem to be getting scared and are moving huge quantities of stablecoins out of protocols. This is the opposite of what happened during the previous bear market in 2018 when the crypto lending protocols performed well. It added that the UST fiasco affected DEFI lending as the stablecoin collapse resulted in concerns from investors and regulators over the viability of these assets. UST was trading at $0.145 and Terra was below its peg.

Circle’s USDC seems to have emerged unscathed this week and traded above the peg but DappRadar noted that USDC traded volume and exploded over the past few days and peaked at $25 billion with some typical volumes for the stablecoin being $5 billion per day:

“The future of stablecoins has been thrown into doubt, but it is well worth remembering that, unlike UST, which is backed by crypto assets, the majority of stablecoin assets are backed with more tangible support.”

According to CoinGecko, the DEFI tokens tanked 47% overall in the past week and the total marekt cap for all coins was close to $100 billion this time last week today is at $52.7 billion while a sea of red is engulfing them all. The tokens for major lending protocols are down over the past week and AAve dropped 38% this week with KAVA being down 45% and COMP falling by 32% in the past week. Chainlink’s LUNK, as well as UNI both, lost about 34% over the past week.