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DeFi’s TVL Fell 40% in May But Bright Spots Emerge

MakerDAO and Tron Buck Historic Selloff

DeFi’s TVL Fell 40% in May But Bright Spots Emerge

Should we even look?

DeFi protocols recorded a May to forget. The Total Value Locked (TVL) across the sector plummeted more than 40% in the month to $111.4B, according to data from DeFi Llama.

The primary cause, of course, was the collapse of Terra and its UST stablecoin. Its demise evaporated $28B from the markets in May. The Ethereum network network also shed nearly $40B. 

As for alternative Layer 1 networks offering cheap smart contracts, they also suffered declines in TVL ranging from  30% to 55%. Avalanche lost $5B, and Binanace Smart Chain dropped by $3B. 

Combined DeFi TVL. Source: DeFi Llama

No surprise, protocols targeting stablecoins were among the hardest hit, with the fallout from UST’s failure prompting many investors to exit or redeem positions.

Curve, a decentralized exchange designed to facilitate efficient stablecoin trading, lost its position as the largest DeFi protocol by cross-chain TVL amid the downturn, with its TVL crashing by more than half in one month. Curve’s TVL is now $8.9B, a far cry from its January record of $24B.

Convex Finance, a protocol that offers additional rewards to Curve liquidity providers, also lost close to half of its TVL in May. The protocol currently ranks sixth with $5.3B in liquidity, five months after ranking as the sector’s second-largest protocol with $21B.

Overtaking Curve

A bright spot was MakerDAO. The long-standing DeFi blue-chip, which is used to create the DAI stablecoin, overtook Curve to rank as the largest protocol with $9.9B despite its TVL pulling back by 30%.

Top liquid staking derivatives provider Lido was also chopped in half amid Terra’s meltdown. The protocol, which allows users to remain liquid while staking, serviced billions in LUNA prior to its failure. The protocol now holds $8.26B, down from $19.4B in early May.

The steep declines by  leading DeFi chains cleared the way for Tron to climb up the rankings.

Tron is Up

Tron’s TVL is up 43% in the last two weeks and it is now the third-largest smart contract network, according to DeFi Llama. The bulk of its growth can be attributed to the network’s leading protocol, JustLend, which has grown 65% during one month despite most DeFi projects being brutalized in May.

Tron TVL. Source: DeFi Llama

JustLend’s $2.95B TVL represents 49% of the value locked on Tron, and positions the protocol as the ninth-largest overall.