HomeCrypto NewsDeFiDeFi capitalization fell 75% in Q2, but...

DeFi capitalization drops 75% in Q2, but user activity remains good

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Along with the market-wide collapse, DeFi protocols also saw a significant drop in transaction volume and price.

The first half of 2022 has been a bumpy ride for crypto investors. According to CoinGecko, with the crypto market still bleeding, investors lose money on DeFi market capitalization. more than 74% off in the second quarter.

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CoinGecko recently released its Q2 2022 Cryptocurrency Report, revealing that the decline in the DeFi sector was mainly due to Terra's downfall.

Due to Terra's partnership with other protocols, the incident created a chain reaction big impact on every project.

DeFi's market cap falls from 142 million dollars down 36 million dollars in three months.

CoinGecko also highlighted that the increase in hacks related to DeFi further exacerbated the market decline, eroding investor confidence in some protocols.

The report cites Ethereum-based DeFi lending protocol, Inverse Finance, Was attacked twice in three months, attackers steal more than worth of digital assets 17 million dollars. 

The report also mentions the attack on the loan company DeFi Rari Capital, with damage 80 million dollars in the May.

“These attacks have negatively impacted Token prices as investors lose confidence in these hacked protocols,” CoinGecko said.

Despite the sharp drop in DeFi's on-chain activity, the report acknowledges that the sector is still keep most users.

While total daily active users fell more than 34%, from nearly 50.000 to just under 30.000 in the second quarter, there were certain instances where DeFi activity spiked.

The first time was in early May, during the Terra collapse. Thousands of DeFi users have flocked to the Decentralized exchange (DEX) as CurveFinance , and uniswap to sell their LUNA and UST funds, the trading volume on these DEXs has skyrocketed as a result.

The second was in June, when crypto lending platform Celsius imposed withdrawal restrictions on users. Traders turn to DeFi protocols, driving daily active users of DeFi protocols 24% spike.

The report also highlights that decentralized exchange Uniswap maintained its position as the largest DEX in the world last quarter, having over half the total mass spot traded in the top 10.

DEX spot volume dropped to $274 billion in Q2 from $446 billion recorded in Q1, Uniswap took control about 60% market share across all chains.

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