Metrics

DeFi TVL Keeps Dropping Despite Valiant Pushback By Polygon

It is safe to say the decentralized finance industry has not recovered from the recent market dip. Although Polygon puts up a valiant fight, the overall TVL continues to go down the drain elsewhere. It is a matter of time before the combined TVL drops below $60 billion, although $50 billion isn’t an impossible outcome either. 

DeFi TVL Bleed Isn’t Over

When crypto markets sour, the Total Value Locked across all DeFi protocols will go down substantially. Despite a recent market recovery, the sentiment has again soured, creating a negative effect in this industry vertical. None of the top chains note an increase in TVL for the past week except Polygon, yet that isn’t sufficient to prop up the overall numbers. 

The big chains, Ethereum, Tron, and BNB Chain, all lost between 4.63% and 19.66% in DeFi TVL this week. It is interesting to see Ethereum suffer the steepest loss, as ETH as the crypto asset noting the sharpest recovery of the three. Evidently, those are two very different metrics that never tell the whole story on their own. Ethereum is still up by 4.12% for the month, although that number may not hold for much longer. 

The only exception is Polygon, which somehow gained 21.5% in Total Value Locked this week. The daily chart looks bearish – in line with overarching market sentiment – but that increase is still interesting. It is the only protocol in the top 35 to note a gain, and nothing in the top 50 notes double-digit percentages. Something appears to be brewing in Polygon DeFi, although it may just be a flash in the pan. 

Even with this gain, Polygon barely represents $2 billion in Total Value Locked. While that puts it ahead of Avalanche and Solana, it is evident the top three networks are the ones people care about the most. Entering that top three isn’t impossible for Polygon, although the network needs to find over $3.4 billion in TVL to make that happen. Even on a good day, that seems impossible, and for good reason.

Is DeFi Over?

When so much money flows out of DeFi – primarily due to markets continually crashing – one must wonder if there is any hope left for this fledgling industry. The concept of decentralized finance still holds much promise, yet the first generation of protocols has seen too many structural issues, hacks, and thefts to build any degree of trust. Moreover, the dealings involving Celsius and other industry bigshots have shown the world the industry isn’t as decentralized as some snake oil salesmen would claim it to be. 

It will be interesting to see what happens to decentralized finance. The industry is unlikely to disappear, but it may not return to over $200 billion in TVL anytime soon either. A fair few blockchains will soon drop off the DeFi radar altogether, especially with more solutions coming to the Bitcoin network. When DeFi exists on Bitcoin, why would anyone need solutions on less secure and trusted networks? 


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JP Buntinx

JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.

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