- Decentralized Finance (DeFi) saw a major blow due to coronavirus fears, as numerous investors decided to opt out completely.
- The current state has caused DeFi to lose over 50% of the total amount locked in only a month, going from $1,2 billion in February to $500 million now.
- The situation is not surprising, as investors wish to protect their assets, and DeFi is still young.
The recent economic instability caused by coronavirus fears has made a massive impact on the crypto industry, and especially on the state of decentralized finance (DeFi). DeFi sector saw a major drop in the total value, which saw around $1.2 billion in locked funds in mid-February.
After coronavirus started spreading from China and inching towards the West, the value started dropping alongside crypto and stock markets, currently sitting around $500 million, and losing around $700 million in the process.
The drop came as a bit of a surprise, as many expected the crypto industry to act as a safe haven, especially due to its availability. DeFi, in particular, saw quite a lot of popularity in the past several months. It was dominated by Ethereum, which is still quite popular, but the crisis has shown that there is still a major lack of trust.
Users, many of whom were major supporters of DeFi during more stable times, decided to completely opt out after the crisis had begun. So far, the DeFi sector saw a very difficult month, with the total value being at around $900 million locked within its smart contracts.
Since then, it lost $400m, dropping to the current $500m, as mentioned.
DeFi also suffered some substantial issues over the past several weeks, as one dApp suffered the theft of 1,193 ETH due to an exploit. Meanwhile, as mentioned, investors decided to liquidate their digital assets and get as much cash as possible due to the current situation.
What will happen to DeFi?
The situation is a difficult one, without a doubt, and it might be the biggest test that DeFi has had to face yet. However, there are many who believe that it is still early to draw any conclusions on the young sector, as there is a lot that could happen over the following few months.
While the dream of decentralized finance might need to be put on hold while the crisis blows over, DeFi still has a chance to prove that it is mature enough, if it can survive the pandemic. Investors will do anything to avoid risks, which is proven by the fact that even those financial instruments that are typically considered safe, are struggling at the moment.
The best that DeFi can do right now is use the situation to reinvent itself, work on potential issues, and return even stronger in a few weeks/months, when the coronavirus pandemic subsides.
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The current state has caused DeFi to lose over […]