DeFi protocols demonstrated resilience throughout this week’s market crash, with Aave dealing with its largest liquidations ever amounting to $300 million on Ethereum mainnet. In line with IntoTheBlock, many of the liquidations occurred from stablecoin loans towards wstETH collateral, the wrapped liquid staking token provided by Lido.
Aave liquidations quantity by asset. Picture: IntoTheBlock
Regardless of ETH crashing by as much as 25% inside every week, liquidations have been efficiently executed, rebalancing the protocol and contributing $6 million in earnings to the Aave DAO.
Notably, the settlement of lots of of hundreds of thousands in liquidations occurred with out counting on a central level of failure, all executed mechanically by sensible contracts.
Liquid restaking tokens (LRTs) and yield-bearing stablecoins skilled temporary deviations from their pegs. EtherFi’s eETH, the biggest LRT by market cap, depegged by as much as 2% throughout Monday’s crash however recovered inside six hours. Non-redeemable LRTs confronted steeper depegs but in addition recovered most of their reductions.
Ethena’s USDe maintained its peg to the greenback, with its provide lowering by $100 million as a result of redemptions. The stablecoin didn’t depeg by greater than 0.5% regardless of the market volatility.
Total, each new and established decentralized finance (DeFi) protocols efficiently weathered the macro storm, demonstrating the trade’s capacity to resist harsh situations with out exterior interference.
Sapphire
Furthermore, the overall worth locked (TVL) in DeFi functions shrunk as much as 10% after the Aug. 4 crash however managed to get well all the worth misplaced in the course of the correction, standing at over $128 billion. In 2024, the TVL of DeFi functions rose 41%, in accordance with information from DefiLlama.
The crypto market downturn was a part of a broader international deleveraging occasion, triggered by the unwinding of the Yen carry commerce following the Financial institution of Japan’s rate of interest hike to 0.25%. This led to a spike within the Yen and widespread promoting of belongings, inflicting a correlation between crypto and shares to hit a six-month excessive.
