Decentralized finance (DeFi) is known for its susceptibility to market concerns and crashes, and last week’s high-profile implosion of Silicon Valley Bank (SVB) caused a frenzy of DeFi transactions, according to a report by market intelligence platform DappRadar. The report noted that last weekend, USD Coin (USDC) lost its peg to the US dollar following news that Circle, the stablecoin’s issuer, had $3.3 billion of its $40 billion reserves stuck in the collapsed SVB. This caused a ripple effect on the DeFi sector, with the market experiencing a significant drop in its total value locked (TVL), falling by 9.6% from $79.28 billion to $71.61 billion.
Fortunately, on March 13, the USDC reserve deposit held at Silicon Valley Bank was fully available to the public, which helped stabilize the market. This announcement led to a 13% spike in DeFi TVL, reaching $81.15 billion. The number of unique active wallets interacting with DeFi contracts also surged from 421,026 on March 8 to 477,094 on March 11, a 13% increase. Transaction count increased by 23% from 1,356,483 to 1,668,992.
The report also noted that the decentralized exchange (DEX) Uniswap was behind the surge in DeFi activity. Uniswap V3, one of the most popular DEXs, experienced a significant increase in unique active wallets, surpassing 67,000 on March 11th, with a volume of $14.4 billion, the highest figure ever registered for V3. The 67,000 unique active wallets were the highest registered on a Uniswap Dapp since the summer of 2021. Moreover, Uniswap V3’s average transaction size on Saturday was $170,080, almost double the mean, indicating that Ethereum DeFi whales were highly active during last weekend.
DeFi has been on the rise for the last few years, with the total value locked in the sector increasing from just $1 billion in July 2020 to over $70 billion in March 2022. DeFi offers a more decentralized and democratic financial system, with peer-to-peer transactions without intermediaries. As the technology has evolved, it has attracted increased investment from both individual and institutional investors.
However, the DeFi market is highly volatile, and investors need to tread with caution. The recent crash of SVB and the resulting impact on the DeFi market highlights how the sector can be highly susceptible to market shocks. Investors need to be aware of the risks associated with investing in DeFi and undertake due diligence before making any high-risk investments in Bitcoin, cryptocurrency, or digital assets.
In conclusion, the recent DeFi transactions frenzy following the SVB collapse highlights the volatile nature of the DeFi market. While the sector offers a more democratic and decentralized financial system, it comes with higher risks, and investors need to be aware of these risks before investing. Nevertheless, the DeFi market’s growth prospects make it an exciting investment opportunity for those willing to take a calculated risk.
