Market Action: Taking Stock of a Brutal Month in DeFi
In this week's Market Action report, Sam Haig takes stock of the rough month in DeFi in January, and how NFTs bucked the trend.
By: Samuel Haig •DeFi News
It’s time to sort out the damage from the January plunge. And take note of a silver lining.
Terra (Luna), the DeFi sector’s largest asset and second-ranked network, was among the hardest hit, with its price crumbling by half while TVL dropped more than a third over the past month. The combined capitalization of DeFi assets has failed to bounce alongside leading cryptocurrencies this past week.
DeFi assets are at $109B according to CoinGecko, up just 3.3% since a four-month low of $105.3B on Jan. 28. By contrast, Ether is up 24% from its Jan. 24 bottom, while Bitcoin is up nearly 15% since its local low on the same date.
The DeFi market cap is down 37% since its all-time high of $174.7B on Nov. 12. DeFi assets currently represent 6% of the global crypto capitalization.
Despite the DeFi market cap remaining down in the doldrums, roughly 70 of the sector’s 100 largest assets are up for the week.
Trader Joe (JOE) + 79%
Synthetix Network Token (SNX) + 30.9%
Lido DAO (LDO) + 25.8%
Orion Protocol (ORN) + 25.1%
Beefy Finance (BiFi) + 24.5%
Rebase tokens have continued to take a beating, with OlympusDAO, Wonderland, Redacted Cartel, and KlimaDAO each posting all-time lows in the past seven days.
Wonderland (TIME) – 57%
Redacted Cartel (BTRFLY) – 23.5%
Keep3rV1 (KP3R) – 20.7%
Terra (Luna) – 20.1%
Tribe (TRIBE) – 12.3%
Fantom Gains Marketshare as DeFi TVL Falls
The total value locked in DeFi protocol has also struggled to recover, currently sitting at $195B after slumping to a four-month low of $182.7B on Jan. 25 according to DeFi Llama.
Curve is the largest protocol by cross-chain TVL with $17.6B locked across eight network’s followed by Ethereum’s MakerDAO and Convex Finance with $16B and $12.4B respectively. Convex’s TVL is down 40% in the past month, while Curve has shed 27% and MakerDAO 11%.
Ethereum represents nearly 60% of TVL, with $116.5B currently locked on the network. Ethereum’s TVL fell to 102.7B on Jan. 23, its lowest level since early August.
The down-trend saw Fantom emerge as the fourth-largest network, with its TVL steadily growing until posting an all-time high of $12.7B on Jan. 25. Fantom now represents $9.3B, ranking behind Terra’s 13.6B and Binance Smart Chain’s $12.1B.
Avalanche and Solana are closely duking it out for fifth with $8.9B and $8.6B respectively.
Leading networks’ relative share of DeFi TVL. Source: The Defiant chart
The combined TVL of Ethereum’s Layer 2 networks fell to its lowest level since Nov. 1 on Jan. 22, dipping slightly below $5B according to L2beat.
Arbitrum continues to dominate the L2 sector with $2.9B or 51.5% of TVL, followed by dYdX with $961M or 17.2%, and Optimism with $474M or 8.5%. Rival optimistic rollup network Metis Andromeda ranks fourth with $395M.
NFTs a Silver Lining
NFTs have bucked the selloff, with the floor prices of top-ranked collection Bored Ape Yacht Club up nearly 50% since the start of January. CryptoPunks ranks second with a floor price of 84 ETH or roughly $230,000.
Terraforms By Mathscastles was the week’s top-traded NFT collection, with DappRadar estimating the series drove $1.64B worth of volume since Jan. 24.
Meebits ranked second with $1.45B in weekly volume, followed by Dotdotdots with $434M, Audioglyphs with $127B, and BAYC with $108M.
Burn Rate Falls
Ethereum’s network activity has since the ETH has begun to recover, with 84,083 Ether burned in the past seven days at a rate of 8.34 ETH every minute according to Ultrasound Money.
The weekly burn rate has dropped by one-third since posting a record high of 12 ETH per minute three weeks ago.
Unrelenting activity in the NFT markets drove persistently high activity on leading marketplace OpenSea, which represented 18.5% of the week’s total burn. ETH transfers were the second-largest source of burnt Ether with 8.7%, followed by Uniswap v3 with 5.3%, and Tether with 3.1%.