The decentralized finance (DeFi) ecosystem suffered further setbacks in August as on-chain economic activity slowed. According to an analysis by investment manager VanEck, stock market volume fell to $52.8 billion in August, 15.5% less than in July.
The results are based on VanEck’s MarketVector Decentralized Finance Leaders Index (MVDFLE), which tracks the performance of the largest and most liquid tokens on DeFi protocols, including Unisawp (UNI), Lido DAO (LDO), Maker (MKR), Aave (AAVE ). ), THORchain (RUNE) and Curve DAO (CRV).
The DeFi index underperformed Bitcoin (BTC) and Ether (ETH) in August, falling 21% this month, the report said. The results were exacerbated by the UNI token’s negative 33.5% performance as investors sold tokens to lock in July gains.
Another key ecosystem metric, Total Value Lock (TVL), fell 8% from $40.8 billion to $37.5 billion in August, easily outpacing Ethereum’s 10% plunge in this month.
Decentralized exchange volume in August. Source: VanEck / DefiLlama
Even though the performance of DeFi tokens was poor in August, the ecosystem saw positive developments during the month, the analysis said. These developments include Uniswap Labs’ dismissal of a class action lawsuit and Maker and Curve’s stablecoin growth.
Curve Finance’s stablecoin crvUSD recovered from a major exploit in late July and saw significant growth in August, reaching a new all-time high with $114 million borrowed. CrvUSD is pegged to the US dollar and is based on a collateralized debt position (CDP) model. This means that users deposit collateral such as ETH to borrow crvUSD.
“CrvUSD’s growth has enabled it to become a significant revenue contributor on the platform, with crvUSD fees exceeding fees charged by all non-mainnet liquidity pools in three of the last four weeks,” it said Report. However, Curve Finance’s governance token has shown no promising signs of recovery since the exploit and its price fell 24% to $0.45 in August.
VanEck analysis notes on CRV token performance:
“Due to the price drop, investors who bought CRV OTC from Michael Egorov last month are only 12.5% above water on their investment and have 5 months left until they can sell. If crvUSD can continue to grow until there is an equalization,” CRV price could see some relief due to the drop in exchange revenue caused by falling DeFi volume. Until then, however, declining DeFi volume remains a strong headwind to CRV appreciation.”
Curve Finance founder Michael Egorov had around $100 million in loans secured by 47% of the circulating supply of the protocol’s native token, CRV. As the CRV price fell nearly 30% following the hacker attack, fears of Egorov’s collateralized loans being liquidated sparked concerns about contagion effects across the DeFi ecosystem. To reduce his debt, Egorov sold 39.25 million CRV tokens to several well-known DeFi investors during the crisis.
Additionally, VanEck noted that current levels of global interest rates, particularly in the United States, continue to put pressure on stablecoins. The total market capitalization of stablecoins fell 2% to $119.5 billion in August. “This is primarily due to increased interest rates in traditional finance, which has prompted investors to dump their stablecoins and invest in money market funds where they can earn a risk-free return of approximately 5%,” the company wrote.
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