Market Analysis Report (22 Jul 2022)

The year’s second quarter was marred by high-profile contagion events within the digital assets ecosystem. While Bitcoin and Ethereum lost 56.3% and 67.4% of their value respectively, the total value locked (TVL) in DeFi protocols plunged 65.7% to $93.2 billion.

Platforms such as Aave, MakerDAO and Curve Finance have played important roles in the crunch of the digital asset space, but managed to function as normal with little to no operational downtime.

A poor macroeconomic environment combined with the possibility of a multi-year-long bear market has made it difficult for decentralized finance (DeFi) protocols to sustain themselves, particularly if they haven’t shown prudent treasury management.

Aave, DeFi’s flagbearer, has seen its treasury value plunge from around $532 million to $102 million in the year’s first half. With all signs pointing to a more sustained period of pain for the DeFi sector, total value locked may remain range bound as crypto prices attempt to recover.

Read CryptoCompare’s 2022 Q3 Outlook to learn more about developments in DeFi, the digital assets space, and macroeconomic factors affecting it.