How affected are DeFi companies by the recent drop in cryptocurrency prices?
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Answer How affected are DeFi companies by the recent drop in cryptocurrency prices?
The first half of 2022 was full of bumps and hurdles for cryptocurrency investors.
As the crypto market continues to bleed, investors are bemoaning the losses as the market value of DeFi companies and projects plunged more than 74% in the second quarter of the year, according to CoinGecko.
Impact of DeFi projects:
Deploy the encrypted data collector”Queen GekkoA recent cryptocurrency report for the second quarter of 2022 revealed that the DeFi sector is suffering and has been negatively affected, mainly due to the catastrophic collapse of Project Terra.
Because of Terra’s partnerships and interoperability with other protocols in the decentralized finance space, the crash started a massive chain reaction that affected every project that supports Terra’s cryptocurrency.
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The internal collapse of the $60 billion Terra project has drastically affected the entire crypto industry, with the market capitalization of DeFi companies dropping from $142 million to $36 million in three months.
Hacking operations targeting decentralized finance projects have worsened the situation:
CoinGecko highlighted that the recent surge in DeFi-related hacks further exacerbated the market’s decline, undermining investor confidence in some DeFi protocols.
The report cited the Ethereum-based DeFi lending protocol Project Inverse Finance, which was hacked twice in three months, with attackers stealing more than $17 million in digital assets.
The report also referred to the attack on the lending platform “Rari Capital”, which was exploited and stolen $ 80 million from it last May.
Quoted from the CoinGecko report:
These attacks negatively affected cryptocurrency prices as investors lose faith in these hacked protocols.
Despite the massive drop in DeFi activity, the report acknowledged that the sector retained most of its users.
While the total number of daily active users fell by more than 34%, from around 50,000 to just under 30,000 in the second quarter, there were certain instances where DeFi activity saw an exponential increase.
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The report also highlighted that leading decentralized exchange Uniswap maintained its position as the world’s largest DEX in the last quarter, amassing more than half of the total spot trading volume across the top ten.
Although the live trading volume of the DEX platform decreased to $274 billion in the second quarter from the $446 billion recorded in the first quarter, Uniswap commanded about 60% of the market share across all networks.
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