According to DeFiLlama data, the total value of locked assets (TVL) in the DeFi sector has decreased by 8% over the past three days, falling to $40.31 billion.
DeFi tasks TVL was worth $43.81 billion as of July 30 but sharply dropped after rogue players attacked many Curve (CRV) swimming pools on July 31. Following the attack, cryptocurrency traders began withdrawing their funds, totaling over $3 billion, using various methods as concerns about contagion arose.
Losses are generally curved and convex.
According to information from DeFiLlama, two DeFi protocols—Curve Finance and Convex Finance—account for nearly two-thirds of the decline, with their TVLs plummeting by more over $1 billion per day over the previous three days.
Given that convex enables users to tap into liquidity and make money from Curve’s stablecoin swimming pools, Curve and Convex, two of the most renowned DeFi protocols in the crypto market, have a close relationship.
The protocols brought thousands of clients to the market, resulting in a combined TVL of more than $40 billion at their height.
Other protocols, such as UniSwap (UNI), Aave (AAVE), and others also experienced losses as a result of the incident, therefore the fall was not limited to those two. However, DeFiLlama data shows that over the previous 24 hours, these platforms have registered delicate recoveries from the autumn.
Liquidity is being pulled by lenders
Lenders withdrawing their liquidity from DeFi platforms as a result of the ongoing business uncertainties may also be to blame for the drop in TVL.
In order to “mitigate contagion dangers,” the decentralized yield-farming fund Auxo DAO announced that it had “promptly eliminated” all of its space on Curve and Convex.
In addition, Michael Egorov, the founder of Curve Finance, has around $100 million in loans on various DeFi platforms backed by 427.5 million CRV (47% of the entire CRV supply), raising concerns about bad debt should the value of CRV fall below a particular level.
According to cryptocurrency monitoring company Delphi Digital, Egorov’s size will probably have an impact on a sizable portion of the DeFi ecosystem.
Due to these anxieties, DeFi sites like Aave have already experienced significant withdrawals. The platform is experiencing an increase in borrowing fees and interest rates, which heightens the risk of liquidation for consumers with excellent loans.
In the interim, Egorov has purchased CRV from businesses and traders through OTC bids to pay off the debt and halt liquidation.