The massive selloff on June 17 caused $455 million in liquidations across assets. The effects of the selloff were felt beyond just the altcoin market, with Bitcoin and Ethereum both seeing notable losses in the past 24 hours.
The impact on the DeFi market was particularly pronounced, with the TVL dropping from $104.123 billion to $99.148 billion in a single day. This represents an absolute decrease of $4.975 billion and a percentage drop of around 4.78%.
Out of the top 10 largest chains by TVL, Avalanche saw the most significant drop, losing 5.6% of its TVL. It was followed by Base, which declined 3.79%, and Arbitrum, which fell 3.13%. These losses are part of a broader downward trend that has been unfolding over the past week, affecting almost all major chains.
| Name | 1d Change | 7d Change | TVL |
|---|---|---|---|
| Ethereum | -3.03% | -2.58% | $60.787b |
| Tron | -0.36% | -1.84% | $8.254b |
| BSC | -2.45% | -5.51% | $5b |
| Solana | -2.33% | -7.31% | $4.139b |
| Arbitrum | -3.13% | -3.75% | $2.911b |
| Blast | -2.41% | -1.82% | $2.053b |
| Base | -3.79% | -6.89% | $1.582b |
| Merlin | +2.32% | +4.68% | $1.214b |
| Polygon | -2.82% | -5.68% | $855.57m |
| Avalanche | -5.60% | -11.74% | $718.2m |
Zooming out to include all chains with a TVL of over $100 million, Thorchain saw the most substantial decrease, with its TVL plummeting by over 29% in just one day. Kava followed with a 12.5% decrease. Smaller and micro-cap chains were not spared, with some experiencing losses exceeding 60%, likely due to a surge in airdrop activities — which often lead to short-term sell pressure.
The sharp decline in TVL across DeFi protocols has several implications for the broader DeFi market. On the positive side, market corrections like these can help eliminate weaker and unsustainable projects, leading to a healthier ecosystem in the long term.
Major TVL wipeouts could push investors to become more discerning, focusing on protocols with solid fundamentals and a strong user base. Additionally, market corrections can present buying opportunities for long-term investors seeking more DeFi exposure.
However, the negative consequences are abundant and could have a more pronounced impact on the market. A sharp decrease in TVL can erode investor confidence, leading to further sell-offs and exacerbating market declines.
Liquidity within DeFi protocols may diminish, making it more challenging for users to execute trades or withdraw funds without significant slippage. This can lead to a vicious cycle of decreasing TVL and liquidity, further destabilizing the market. Furthermore, as TVL drops, the perceived value and trust in DeFi protocols can wane, which might deter new users from entering the space.
The current decrease in TVL, while not as severe as some past market corrections, is particularly concerning given the size and maturity of the DeFi market today. The introduction of spot Ethereum ETFs will add another layer of complexity, as it will integrate DeFi with more traditional financial instruments, potentially increasing volatility.
Spot ETFs are expected to attract significant institutional investment but also introduce new regulatory and market risks. Fluctuations in DeFi TVL can now have broader implications, affecting not just the crypto-native community but also traditional financial markets starting to interact with DeFi through these new financial products.
Altcoin performance can impact major cryptocurrencies and vice versa, with market sentiment quickly spreading across different assets. The fact that Bitcoin and Ethereum were also affected shows how vulnerable they are to broader market trends. While these fluctuations are not unprecedented, they come at a time when the DeFi market is significantly larger and more integrated with traditional finance.
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