DeFi in Times of a Crypto Market Selloff

This is how a down market affects decentralized finance.

Hello defiers! Today ETH is down more than 9 percent to $160, and I’m looking into what the effect has been in decentralized finance.

DeFi Traders Remain Bullish on ETH Amid Selloff

It’s a bad day for ETH today, but DeFi traders are bullish.

Here’s what the impact of today’s crypto market sell-off has been on DeFi:

Loans originated

Loans originated today in decentralized finance were at the third highest in the past month, at almost 47k ETH ($7 million), with almost 197k ETH ($31 million) supplied as collateral, according to LoanScan.

Almost 60 percent of loans were for Dai, which is often used to trade on leverage and buy more ether. Ether loans, which can be used as a way to short sell or bet against ether, were 30 percent of the total.

Image source: LoanScan


More than 80 percent of the collateral supplied today was in ether. Those putting up ETH as collateral to back a loan on a day when it’s down almost 10 percent are likely speculating the cryptocurrency will rebound. To be sure, while some the ETH collateral added was to back new loans, part of also went to top off existing loans which became under-collateralized with the price drop.

Overall, colletarization of DeFi loans slid but remains well above 200 percent. More than $1.8 million was liquidated, the highest in one month.

Image source: LoanScan

Loans Outstanding

More than 73k ETH ($12 million) in loans were were repaid, about double the amount for loans originated, which caused a decline in total loans outstanding in dollar terms to the lowest since September.

Total Value Locked

Increased loan origination and collateral added caused total value locked in decentralized finance platforms to climb to a record in ether terms of 4 million ETH, according to DeFi Pulse. Of course TVL fell in dollar terms as the value of ether fell.

The amount of ether locked in DeFi, which jumped to a record 2.5 million ETH, was responsible for the increase in total value locked, as traders topped off their loans and also speculated the cryptocurrency would rebound.

Image source: DeFi Pulse

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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.