Key Takeaways
- Aave efficiently executed $300M in liquidations through the market crash, contributing $6M in income to its DAO.
- Liquid restaking tokens and yield-bearing stablecoins skilled transient depegs however rapidly recovered, demonstrating market stability.
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DeFi protocols demonstrated resilience throughout this week’s market crash, with Aave dealing with its largest liquidations ever amounting to $300 million on Ethereum mainnet. In line with IntoTheBlock, a lot of the liquidations occurred from stablecoin loans in opposition to wstETH collateral, the wrapped liquid staking token provided by Lido.
Regardless of ETH crashing by as much as 25% inside per week, liquidations had been efficiently executed, rebalancing the protocol and contributing $6 million in income to the Aave DAO.
Notably, the settlement of a whole bunch of hundreds of thousands in liquidations occurred with out counting on a central level of failure, all executed robotically by sensible contracts.
Liquid restaking tokens (LRTs) and yield-bearing stablecoins skilled transient deviations from their pegs. EtherFi’s eETH, the biggest LRT by market cap, depegged by as much as 2% throughout Monday’s crash however recovered inside six hours. Non-redeemable LRTs confronted steeper depegs but additionally recovered most of their reductions.
Ethena’s USDe maintained its peg to the greenback, with its provide lowering by $100 million because of redemptions. The stablecoin didn’t depeg by greater than 0.5% regardless of the market volatility.
Total, each new and established decentralized finance (DeFi) protocols efficiently weathered the macro storm, demonstrating the trade’s capacity to resist harsh situations with out exterior interference.
Furthermore, the overall worth locked (TVL) in DeFi purposes shrunk as much as 10% after the Aug. 4 crash however managed to get better all the worth misplaced through the correction, standing at over $128 billion. In 2024, the TVL of DeFi purposes rose 41%, based on information from DefiLlama.
The crypto market downturn was a part of a broader international deleveraging occasion, triggered by the unwinding of the Yen carry commerce following the Financial institution of Japan’s rate of interest hike to 0.25%. This led to a spike within the Yen and widespread promoting of property, inflicting a correlation between crypto and shares to hit a six-month excessive.
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