This week’s tariff-inspired market meltdown has led to a rapid sell-off across crypto-assets, with BTC trading below $80K and ETH hitting a two-year low of $1,432. The decentralized finance (DeFi) sector was not entirely immune to the chaos, as total value locked (TVL) slumped to its lowest point since November at $95 billion.
However, it wasn’t all bad news for DeFi.
Amidst plunging asset prices, DeFi exhibited resilience with muted outflows; key usage metrics performed far better than the price of ETH, the asset that underpins much of Ethereum’s DeFi ecosystem.
In fact, TVL on Aave, the largest DeFi protocol, rose in ETH terms this week as deposits hit a record high of 11.02 million ETH ($17.32 billion). Deposits have been steadily increasing since the turn of the year when it stood at just 3 million ETH.
This trend underscores an important shift in the crypto landscape. While the recent bull market has often focused on hype-fueled meme coins, the real-world use cases of DeFi remain alive and well. Past cycles have seen DeFi struggles due to the dominance of centralized exchanges and liquidity issues; however, capital is now flooding into the market as traders implement delta-neutral strategies that enhance liquidity and contribute to the longevity of DeFi.
As the market edges closer into bearish territory, DeFi may well prove to be one of the pillars keeping the crypto ecosystem afloat.
Aave is not the only protocol witnessing inflows this week. TVL on Sky—formerly MakerDAO—has increased from 1.85 million ETH to 4.63 million ETH. Moreover, the lending protocol Spark experienced a notable boost, adding 1 million ETH in deposits earlier this month, according to DefiLlama.
The rush to DeFi during a market sell-off can primarily be attributed to traders seeking to de-risk by moving to stablecoins to secure a delta-neutral yield through lending and borrowing instead of holding spot exposure during volatile conditions.
Decentralized exchange volumes have also remained stable, reaching $11.8 billion on Monday and $9.8 billion halfway through Tuesday, significantly higher compared to last week when volumes failed to surpass $7 billion on any single day.
