A massive selloff on June 17 resulted in a loss of $455 million in liquidations across various assets, impacting not only the altcoin market but also leading to significant losses for Bitcoin and Ethereum within the past 24 hours.
The decentralized finance (DeFi) market felt the effects of the selloff particularly strongly, with the Total Value Locked (TVL) dropping from $104.123 billion to $99.148 billion in just one day. This represented a substantial absolute decrease of $4.975 billion and a percentage drop of around 4.78%.
Among the top 10 largest chains by TVL, Avalanche experienced the most significant loss, dropping by 5.6% of its TVL. Base followed with a 3.79% decline, and Arbitrum fell by 3.13%. These losses were part of an overall downward trend affecting nearly all major chains over the past week.
Looking at all chains with a TVL of over $100 million, Thorchain saw the most substantial decrease, with its TVL plummeting by over 29% in just one day. Kava followed with a 12.5% decrease. Even smaller and micro-cap chains were not spared, with some experiencing losses exceeding 60%, possibly due to a surge in airdrop activities resulting in short-term sell pressure.
The decline in TVL across DeFi protocols carries multiple implications for the wider DeFi market. While market corrections can help weed out weaker projects and promote a healthier ecosystem in the long run, they could erode investor confidence, leading to further sell-offs and worsening market declines.
Diminished liquidity within DeFi protocols may make trading or fund withdrawals more challenging, potentially creating a cycle of decreasing TVL and liquidity that destabilizes the market further. Additionally, as TVL drops, trust in DeFi protocols may decline, discouraging new users from entering the space.
The current TVL decrease, though not as severe as some past corrections, is concerning given the size and maturity of the DeFi market today. The introduction of spot Ethereum ETFs adds another layer of complexity, integrating DeFi with traditional financial instruments and potentially increasing volatility.
Altcoin performance can impact major cryptocurrencies, and vice versa, as seen in how Bitcoin and Ethereum were affected by the recent selloff. These fluctuations come at a time when the DeFi market is more substantial and more intertwined with traditional finance.
Overall, the selloff highlighted vulnerabilities in various cryptocurrencies and raised concerns about market stability as the DeFi sector continues to evolve and interact with traditional financial markets.
