FTX Contagion Effects Evident In DeFi Projects

DeFi Not Free From FTX Contagion

One of the branches in the crypto industry, which suffered massively from the FTX contagion, is undoubtedly the decentralized finance (DeFi) sector.

Since FTX’s downfall (i.e. about 37 days ago), total value locked (TVL) in DeFi projects has shrunk by roughly 25% value-wise.

Presently, TVL belonging to entire DeFi projects can be valued at a price of $41.67 Billion. Even in the past 24 hours, the TVL value has further declined by roughly 1.63%.

This is because due to the FTX contagion, investors have started losing their confidence and trust in cryptocurrencies altogether.

No matter the projects, they are all facing downtrends and are becoming weaker by the day. This is because people are no longer interested to invest heavily in cryptocurrencies.

The global crypto market downtrend is also a major reason why people are no longer interested in cryptocurrencies.

The crypto market is full of risks and people are not willing to take those risks given the current market situation.

Makerdoa – Largest DeFi Bidder In Terms of TVL

Makerdao is undisputedly the biggest DeFi protocol of the time whose TVL is more than $6.26 Billion. The protocol also commands more than 15% of the global TVL economy.

According to Defillama.com, FTX contagion also infected Makerdao’s TVL which has been subsequently reduced by approximately 8.41%.

After Makerdow, other projects which dominate the DeFi sector include projects such as Lido, Aave, Uniswap, Justlend, Curve, Compound Finance, Pancakeswap, etc.

All these projects are currently the top-10 leading DeFi protocols in terms of their individual TVLs.

Amongst the top-10 DeFi projects, Aave was perhaps the most unfortunate one which saw its TVL reduced by more than 15% in the past month.

Meanwhile, some positive aspects helped Convex Finance to see its TVL enhanced by almost 43.87% while the industry was edging down.

Ethereum’s Dominance in DeFi Sector

There is a reason why Ethereum is regarded as the best blockchain network the industry has seen so far. Not even Bitcoin blockchain has the ability to compete with Ethereum blockchain which is the world’s most-used network.

The network enjoys dominance over various branches of the crypto industry including Non-Fungible Tokens, DeFi, and Metaverse, let alone crypto trading.

This fact can be further proven by the examination of global TVL. The examination would reveal that 57.55% of global TVL is based on the Ethereum coin. This means that out of $41.67 Billion global TVL, $23.98 is comprised of Ether coins.

While the rest of the $17.69 TVL is comprised of multiple cryptocurrencies, including Bitcoin.

Second Largest Defi Economy Contributor Binance

The world’s leading crypto platform, Binance, enjoys the privilege of holding the second-largest TVL in the DeFi sector as of 12th December 2022. Binance’s contribution to the global TVL is $4.99 which represents 12.4% of Binance’s dominance.

Similarly, with regard to the overall TVL size, prominent networks such as Tron, Arbitrum, Polygon, etc. come after Ethereum and Binance.

They are then joined by projects like Avalanche, Optimism, Fanton, Solana, etc. by securing positions in their respective order.

FTX contagion is also affecting the economy of smart contracts based on tokenized crypto. In the past seven days, the smart contract economy has attracted funds to the tune of $810.67.

The downfall of Global Economies

The economy is however reduced to 2.3% further in the past 24 hours and is now resting at $261 Billion only. Evidently, the reduction in the daily trade volume has been the cause of the economic decline.

Similarly, over the past two months, the smart contract economy has shrunk by at least 7.77% against the greenback. The reduced economy is now comprised of $261 Billion only which, prior to the 7.77% reduction, was $283 Billion.

It may be taken into consideration that Ethereum being the dominant asset in the smart contract economy is also suffering from a value decline. Since the past 24 hours, its value has dropped by at least 1.6%.