Ethereum saw a further decline in total value locked a few days to the highly anticipated “Merge” due to a continuous drop in the amount of liquidity poured into decentralized finance (DeFi).
An overall bearish market that followed the new milestones reached in 2021 earlier in the year has extended into the third quarter of the year. Unfortunately, Ethereum as the leader of the DeFi sector has not been spared as the chain shed 7% of its opening day value locked.
On Aug. 1, Ethereum TVL was $37.32 billion, and declined to $34.36 billion on the last day of the month, according to data from DeFiLlama.
Ethereum TVL Falls More than $60 Billion off Year’s Peak
After reaching new highs in 2021, Ethereum made several attempts to shackle off the bears in January when it reached a yearly peak of $100.99 billion.
TVL by the close of August was more than two times below this statistic. To put it simply, Ethereum has sunk by $66.6 billion in the last eight months.
Ethereum TVL Largely Reliant On dApps
Like other smart contract chains such as Solana, TRON, Binance Smart Chain, Avalanche, and Fantom, Ethereum total value locked is primarily determined by the performance of decentralized applications housed in its ecosystem.
MakerDAO, the largest dApp on Ethereum lost 5.21% of its value locked to around $8 billion. Lido, a liquid staking protocol with more than $6 billion locked, shed 1.8% of its value. Decentralized exchanges (DEX) such as Uniswap and Curve Finance were not spared.
Uniswap, the largest DEX by trading volume recorded less than $40 billion in volume for the second consecutive month reaching approximately $39 million in August.
Within the same period, Curve Finance reached a yearly low recording around $6 billion in volume, Dune Analytics data showed.
Ethereum remains king of DeFi despite a plunge in liquidity
Despite sinking by more than $60 billion in TVL since Jan. 5, Ethereum continues to maintain its lead over other blockchains despite the number of deployments developers of dApps have made on more scalable networks.
Projects such as Polygon, Avalanche, TRON, Solana, and Binance Smart Chain gained a significant part of the DeFi market due to the scalability problem associated with Ethereum’s reliance on the old Proof-of-Work (PoW) network.
While the market remains unprofitable for many due to the collapse of several projects which lacks the needed infrastructure to compete, the transition to a Proof-of-Stake (PoS) network could see a resurgence in the amount of liquidity poured into Ethereum dApps.
Ethereum retested $2,000 in August
The native asset of Ethereum, ETH has struggled in the last three months after going through several price corrections and resistance levels.
With that said, the coin crossed $2,000 for the first time since the last days of May. It eventually reached a monthly high of $2,022.79 on Aug. 14. After fighting off a steep decline in its price, ETH reached a monthly low of $1,427.73 on Aug. 29. Throughout Aug., Ether decreased by 7% from $1,681.45 on Aug. 1 to $1,553.68 on Aug. 31.
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