What you should know about DeFi’s meltdown after Terra’s episode

ambcrypto.com:

The bear market that pulled down cryptocurrencies and NFTs alike is currently on to its next target. It seems that the DeFi segment is next-in-line for a bloodbath. DeFi’s Total Value Locked has fallen dramatically since early April, with prominent events wreaking havoc across the Web3 space.

The TVL on DeFi dropped below $110 billion for the first time since July 2021. The DeFi space has seen a drop of approximately 60% since its recent peak in early April, when the TVL tipped $230 billion. Now, there are several reasons that probably explain the recent performance of the DeFi space.

In May alone, Terra’s crash led to major turbulences in the crypto-industry with over $40 billion wiped out. During the crash, the prices of major cryptos hit their local bottoms for the year 2022. Bitcoin [BTC] dropped to $26,500 while Ethereum [ETH] plunged to $1,600 during the market sell-off.

The S&P 500 dropped by more than 20% briefly to confirm bear market tendencies piling more pressure on risk assets. After this confirmation, BTC took another dip and tapped the “Extreme Fear” zone on the Fear & Greed Index.

The Ethereum network, while blessed with the largest TVL numbers, has dropped by more than 70% since January to $70 billion, at the time of writing. Solana has dropped by more than 50% too. It was hovering at around $8 billion in April, following which, it fell to $4 billion post Terra’s crash.

Source: The Block/ DeFiLlama

The most interesting case is that of the Terra blockchain itself. It is currently ranked 29th with a total value locked of $129 million. Once upon a time, it was the second largest in DeFi before the de-pegging debacle. Terra projects had a total of $31 billion stored in DeFi, which has since been wiped out.

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