Crypto crash wreaking havoc on DeFi protocols, CEXs

Published at: June 13, 2022

On Monday, a heavy cryptocurrency sell-off in the markets caused significant ripples for projects and entities alike. On popular decentralized finance, or DeFi, lending protocol Aave, utilization rates have fallen across nearly all stablecoin borrowings. Most notably, borrowings for Binance USD (BUSD) now stand at a mere 30% compared to a high of 80% back in May. 

The utilization rate is the ratio of borrowed to deposited funds. Since borrowers are required to post digital asset collateral before taking out a loan on Aave, users are likely withdrawing en mass in light of Monda's sell-off to prevent liquidation. Data from DeFi Llama indicates that Aave's total value locked has fallen from $33.51 billion last October to $8.11 billion.

According to CryptoRank Platform, TVL in overall DeFi protocols has fallen by 55% since the end of April, driven, in part, by capital flight and a decrease in the value of digital assets. Currently, there is $115.7 billion worth of funds remaining, with $72 billion located on the Ethereum blockchain. It represents a fraction of the $303.9 billion in peak TVL witnessed in November 2021. 

Over the weekend, cryptocurrency exchange Crypto.com announced that it was laying off 260, or 5%, of its corporate workforce, citing difficult market conditions. Just last month, the company also stated that it was significantly cutting back rewards for its popular crypto-backed debit card. Annual cash-back APYs for spending have reportedly been scaled back from 2% to 8% to just 0% to 2% for cardholders with unstaked assets. 

In an emotional message posted by founders Monday morning, BlockFi also announced that it was laying off 20% of its 850-strong staff. The firm cites the need to achieve profitability goals for the long haul in making the decision. Similarly, cryptocurrency exchange Coinbase has decided to extend a hiring freeze and rescinded job offers to hundreds of new hires. Though Brian Armstrong, its CEO, has said that "funds are safe" amid bankruptcy protection fears surrounding the exchange. Other major crypto firms are reportedly cutting 10% of their staff amid the ongoing bear market. 

Tags
Blockchain
Exchanges
Cryptocurrencies
Defi
Investments
Related Posts
Crypto wallets: An important battlefront to gain wallet share and mind share
Digital wallets are software constructs that mimic physical wallets and provide the functionality of storing, using and categorizing payment instruments. The journey of digital wallets started with payments and morphed to other forms of stubs such as digital passes, tickets and boarding passes. However, crypto wallets attempt to redefine the digital wallet landscape as something more than safe storage of payment and crypto instruments. With more than 100 crypto wallets and growing, this sector in the cryptosphere is getting crowded and adding further complexity to an already fragmented blockchain and digital asset space. As I study this space and try …
Decentralization / Aug. 29, 2021
The remaining steps to mainstream institutional investment
It has been said that you only get one chance to make a first impression. Perhaps the best example of this old adage is the cryptocurrency space. From exit scams and money laundering, to unaudited code and high carbon footprints, the crypto landscape has spent the better part of the past decade scrubbing itself of its infamous past. For many, the sanitizing of the decentralized ecosystem was inevitable — simply a matter of when, not if. This mindset hindered the sense of urgency that should have been on display and may have ultimately contributed to the skepticism exhibited by mainstream …
Adoption / May 29, 2021
3 things the crypto sector must offer to truly mainstream with TradFi
In the past year, we’ve seen the crypto economy undergo exponential expansion as heaps of money poured into various cryptocurrencies, decentralized finance (DeFi), nonfungible tokens (NFT), crypto indices, insurance products and decentralized options markets. The total value locked (TVL) in the DeFi sector across all chains has grown from $18 billion at the beginning of 2021 to $240 billion in January 2022. With so much liquidity in the ecosystem, the crypto lending space has also grown a significant amount, from $60 million at the beginning of 2021 to over $400 million by January 2022. Despite the exponential growth and the …
Technology / Feb. 5, 2022
What happened? Terra debacle exposes flaws plaguing the crypto industry
The past week has been a dark period in the history of crypto, with the total market capitalization of this industry dipping as low as $1.2 trillion for the first time since July 2021. The turmoil, in large part, has been due to the real-time disintegration of Terra, a Cosmos-based protocol that powers a suite of algorithmic stablecoins. Approximately a week ago, LUNA ranked among the 10 most valuable cryptocurrencies in the market, with a single token trading at a price point of $85. By May 11, however, the price of the asset had dropped to $15. And, 48-hours on, …
Adoption / May 13, 2022
Angel investors vs. venture capitalists
Angel investors and venture capitalists are two types of private investors who provide funding for early-stage and growth-stage companies. However, there are some key differences between them that we will cover in this article. Who are angel investors? High-net-worth individuals who invest in companies at an early stage in exchange for equity in the business are known as angel investors. They frequently invest their own funds and take a more active approach to investment, offering advice and mentoring to the businesses they support. The well-known angel investors in the crypto world include: Roger Ver — He is known as “Bitcoin …
Adoption / Feb. 15, 2023