From December’s Peak, Total Value Locked (TVL) in Decentralized Finance (DeFi) Drops Over 30%
Since the peak in December, the Total Value Locked (TVL) in decentralized finance (DeFi) has declined by over 30%, reflecting ongoing market uncertainties and macroeconomic pressures.
According to defill, the current TVL in DeFi stands at $94.65 billion, which is a significant distance from the $137 billion mark reached on December 17, after which it has been steadily declining. Last month, the TVL recently hit a low of $88 billion before slightly rebounding.
The surge in DeFi locked value in the second half of last year coincided with the general cryptocurrency market rally, primarily due to the election of U.S. President Donald Trump on November 5. The $94.49 billion TVL is similar to levels prior to the election and had risen above the $100 billion mark. However, the latest decline is indicative of changing investor sentiment.
Kronos Research Chief Investment Officer Vincent Liu stated that the recent decline in DeFi TVL suggests that market uncertainty may be weighing on decentralized finance.
He further noted the decline in active addresses for Ethereum and Bitcoin over the past week, reflecting users’ loss of confidence in price corrections, escalating competition from alternative blockchains, and ongoing macroeconomic issues.
Source: defill
Macroeconomic Pressure Reduces DeFi
The Trump crypto bull faced challenges in Q1 as the government imposed reciprocal tariffs on key trading partners. This evolving dynamic has dampened early excitement towards the pro-crypto stance.
Apart from trade, concerns over U.S. persistent inflation and the Federal Reserve’s delays in interest rate cuts have continued to hinder sentiment. Bitcoin’s historical peak in January was above $108,000, but it has now fallen to around $83,000. Similarly, Ethereum has dropped from $4,000 in December to its current $1,800.
Kevin Guo, Director at Hashkey Research, pointed out that macroeconomic challenges are blocking the growth of DeFi. He explained that despite the broader DeFi ecosystem developing over the past few years, significant work remains to create not only biased products but also to integrate them into institutional financial products.
According to Guo, competitive rates, stronger security assurances, and simplified user experiences are necessary prerequisites for open market participation.
Innovation and Policy Shifts May Aid Recovery
Some experts believe that despite short-term volatility, DeFi remains a strong long-term investment.
Liu emphasized that innovation is “crucial” for the recovery of DeFi, as the industry must continue to innovate.
He pointed out that reversing Trump’s tariff policies and a positive report on the U.S. Consumer Price Index (CPI) due next week could trigger a widespread market recovery, helping to re-ignite interest in DeFi.
Nick Ruck, Research Director at LVRG, stated that DeFi is well-positioned as a long-term growth story. He further noted that as global regulators become increasingly friendly towards blockchain technology and incorporate real-world assets into financial frameworks, DeFi is becoming an attractive long-term investment prospect with relatively stable investor returns.
In the face of ongoing market challenges, the future of DeFi may depend on regulatory balance, macroeconomic patterns, and the ability of DeFi protocols to adapt to user needs.
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