How Ethereum has jeopardized the DeFi market

• A further fall in the price of ETH could send the DeFi market into another round of liquidation.
• The DeFi TVL dipped across all chains.

Ethereum [ETH] and assets linked to the Decentralized Finance (DeFi) sector are experiencing a wave of uncertainty in the market. While ETH’s dominance in the smart contract space has been unwavering, liquidation in the crypto market branch reached $11 million.

How many Worth 1,10,100 ETHs today?

According to Parsec Finance data, this liquidation was the highest since May 12. However, market participants may need to be more careful as DefiLlama’s data sheds light on potential threats.

DeFi: Wary of the possibilities

At the time of writing, the multi-chain DeFi aggregator showed that the total liquid assets amounted to $1.7 billion. This metric describes the total value of DeFi assets with open futures or contract positions that can incur losses depending on market direction.

Based on DefiLlamas data, most of the liquidation in the past 24 hours took place through the MakerDAO [MKR] protocol. However, several were open pinned Ether [stETH] and packaged Bitcoin [WBTC] positions that risk suffering the same fate.

Source: DefiLlama

This could therefore prompt market participants to carefully evaluate the risks associated with their sentiment.

The past 24 hours have not been rosy for the broader crypto market. For example, the value of ETH fell by 5.93%. DeFi tokens like arbitration [ARB] And Lido Finance [LDO] lost 12.49% and 18.16% respectively.

With the prices falling, DefiLlama revealed that another 20% total drop in value could take another $161 million out of the market.

While 20% may seem like a lot, the state of the market at the time of writing does not negate the possibility. This is because more than half of the cryptocurrencies in the top 50 by market capitalization have fallen by double digits in the past 24 hours.

TVL down the drain

Interestingly enough, the Total Value Locked (TVL) is not exempt from the market’s widely held gloomy picture. From nearly 200 chains in the industryonly one – zkSync Era – registered growth in the past 24 hours.

As an indicator of whether a DeFi asset is undervalued or overvalued, the TVL measures the value of tokens temporarily deposited into a protocol.

Realistic or not, here it is MKR’s market capitalization in terms of LDO

Ethereum, which has the highest TVL of $25.28 billion, lost 4.36% of smart contract deposits within the said period. The decline thus implies that investors have hoarded liquidity and flown out of the ecosystem. So Ethereum may not be performing at its highest capacity.

Below the Ethereum blockchain, Lido Finance continues to lead the pact with a TVL of $12.65 billion. Other projects, including MakerDAO, Crooked finances [CRV], And Aaf [AAVE], ran behind.

Source: DefiLlama