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DeFi Market Takes a Sharp Decline in Q2, but Users Remain Optimistic

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VOC, Voice of Crypto, DeFi Market

The DeFi market has been beating this past quarter (Q2) with a 74.6% market cap decline, but many users are still active.

The overall DeFi market cap fell from $142 million to just over $36 million in the second quarter, with most of that decline coming due to the collapse of Terra and its stablecoin TerraUSD classic.

According to a report, the number of hacks that happened during the quarter also contributed to the fall since so much money was lost. For instance, Inverse Finance and Rari, lost $1.2 million and $11 million, respectively, due to various hacks during Q2.

“These attacks have negatively impacted token prices as investors lose faith in these hacked protocols.” 

As per CoinGecko, despite all the turmoil, the DeFi market retained its daily active users. The number of daily active users decreased only by 34.5%, from 50,000 to 30,000 in Q2. Also, the report highlighted multiple spikes in DeFi activities during this quarter.

The first spike occurred in May when the stablecoin Terra collapsed. This led to a mass movement of users selling their falling Terra (LUNA) and USTC on Curve finance and Uniswap.

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The second spike occurred when crypto lending platform Celsius filed for bankruptcy and prevented users from withdrawing.

“In both events where centralized entities have failed, users have flocked to enjoy DeFi’s permissionless nature.”

DeFi market: NFT Trading Volume Tumbles

According to research, the trading volume of NFTs dropped from its peak of 26.2.% in June 2021 to $7.6 billion in Q2. The biggest contributor to this decline was the decrease in the Ethereum network’s NFT offerings.

The summer of 2022 also saw a collapse in the trading volume for non-fungible tokens, with NFT’s trading volume reaching $830 million. During this time, the floor price of NFTs also collapsed.

The second quarter of 2022 was challenging for the NFT market, with several high-profile projects halting operations and a general decrease in interest from collectors and investors.

This is likely due to the DeFi market crash as well, as many people invest in NFTs through Ethereum smart contracts. With the value of Ethereum dropping, so did the value of NFTs. 

Despite the market crash, many DeFi users are still hopeful for the future of the industry. They believe that the industry is still in its early stages and has a lot of potential for growth.

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“What we are seeing is just the beginning,” said one DeFi user. “The industry is still very young and there is a lot of room for innovation.”

Another DeFi user added:

“I am confident that the industry will bounce back stronger than ever. We have already seen a lot of progress in the past year and I believe that the best is yet to come.”

In addition, overlooked DeFi Altcoin AAVE is primed for massive growth once the bear run is over. 

 

 

 

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Jim Haastrup is a freelance blockchain and metaverse writer. He helps founders, investors, startups, crypto, and blockchain enthusiasts connect with their audience and win investment through the written word.

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