Ethereum (ETH) staking has seen success despite a decline in the value of DeFi assets. Through platforms like Lido and Coinbase’s staking service, Ethereum staking has remained popular. The crypto sector has faced challenges over the past year, including failures of centralized exchanges and services, resulting in capital outflows from DeFi. Data from DefiLlama reveals that the total value locked (TVL) within DeFi protocols across different chains has fallen to under $38 billion, a significant drop from the industry’s peak in November 2021 when TVL reached $178 billion.
Interestingly, the current TVL figure is even below the amount shortly after the collapse of centralized exchange FTX in November 2022, which led to a two-year low in assets locked within DeFi protocols. Although the market experienced a recovery in April, with TVL reaching approximately $50 billion, the metric has since retraced back to below $38 billion, despite no significant declines in underlying crypto values.
It’s important to note that the $38 billion figure does not include funds locked in liquid staking protocols like Lido. Since the collapse of FTX, Lido has witnessed a significant increase in its TVL, rising from $6 billion to $13.95 billion. These protocols deposit assets into another protocol, which explains why they are not accounted for in the total TVL tally.
Coinbase’s staking service, launched in September 2022, has also accumulated an additional $2.1 billion worth of Ethereum, bringing the total assets held by such services to $20.2 billion. Liquid staking allows investors to stake their assets and earn yield while still having trading liquidity through pegged assets issued by the staking provider.
This alternative can be more attractive to investors compared to lending protocols like Aave, which require locking tokens and potentially exposing users to protocol risks. Aave’s ETH and USDC yield rates are currently 1.63% and 2.43%, respectively, while Coinbase offers more lucrative rates of 3.65% for ETH and 4.5% for USDC.
Furthermore, it’s worth noting the decline in TVL for several DeFi platforms over the past month. Aave’s TVL has fallen by 21% to $4.5 billion, and Curve Finance experienced a 26% decline to $2.3 billion. One potential factor contributing to this decline could be the hawkish monetary policy of the United States Federal Reserve, which has led to higher yields on short-term government debt, making it a more attractive option for investors compared to stablecoin yields within the DeFi space.
