The collapse of Terra ecosystem cryptos TerraUSD (UST) and LUNA had a huge impact on the entire cryptocurrency market, including the DeFi market. Many investors now fear that a similar UST will befall their investments, which collapsed after Anchor’s promised 20% returns.
$80 billion was wiped from the DeFi market amid the LUNA collapse
As in the case of Terra, as part of an effort to save themselves from seeing their favorite crypto projects collapse, they’ve been opting out of various DeFi protocols in recent weeks. It was a huge fund move. According to data from DeFi monitoring platform DeFi Llama, the value of TVL across various protocols has dropped from $195 billion to $86 billion following the collapse of the Terra ecosystem.
A quick look at MakerDAO, the largest DeFi project by TVL, shows the platform’s TVL volume down by a third in less than a month to 9.7 billion shows the dollar.
A similar incident was recorded for the second largest DeFi platform called Curve, a protocol that allows users to exchange stablecoins for a negligible fee. The total value locked in Curve fell over 55% to $9 billion, according to DeFi Llama data.
Analysts highlight massive capital outflow
Kaiko, a crypto research firm, comments on the drop in TVL’s volume, while DeFi He stated that the reason why staking in protocols has been on the decline lately is the large capital outflows from the cryptocurrency space. Arca Chief Investment Officer Jeff Dorman said in a recent report:
Fear is rampant. You have to search long and hard to find a bullish trader on any risk asset.
The market suffers big losses after LUNA and UST
Besides the DeFi market, the entire cryptocurrency market also suffered huge losses. Since the unfortunate incident with Terra began, over $1 trillion in funds have been wiped from the entire market. Bitcoin dropped from around $40,000 to just under $27,000, while Ethereum (ETH) dropped below $1,800.
With the huge losses suffered by investors in the past week following the collapse of the Terra ecosystem, many feared widespread capitulations will be recorded in the crypto market. Meanwhile, as we report at Kriptokoin.com , IMF Managing Director recently urged crypto investors not to flee the industry as the market has become a crucial aspect of the global financial industry.
