The recent meltdown in the crypto money market has also given the decentralized finance (DeFi) side a hard time. According to the news in Bloomberg, the downward movements in the crypto money market have negative effects on the DeFi space.

Bitcoin, the leader of the cryptocurrency ecosystem, lost an average of 50% after hitting all-time high price levels (BTC ATH: 69,045 USD – CoinGecko) in November. This loss of value in Bitcoin also brought down altcoins. In particular, cryptocurrencies of DeFi protocols such as Aave, Compound and MakerDAO experienced high drops.

Pedro Herrera, data analyst at DappRadar, claimed that if the downward momentum in crypto assets continues and there is a bear market that can cover more than a year, user demand may decrease very seriously.


Noting a decline scenario that could last more than a year, the data analyst stated that 80% of DeFi protocols could disappear with the extraordinary decrease in user demand. Herrera said that in such a scenario, only 20% of all decentralized finance protocols could persist.

   "Probably 20% of applications that represent 80% of industry value will end up being permanent. We may see protocols that are not widely used disappear."

Decline Acceleration in DeFi Protocols

According to DappRadar, active user wallets interacting with high-volume DeFi protocols have seen a decline of 20% to 30% over the past two weeks. Along with the downward momentum in Bitcoin, DeFi tokens with high market value also experienced high depreciation. In addition, the total value locked in DeFi protocols (TVL: Total Value Locked) has also seen significant decreases in recent months.

According to data from Dune Analytics, nearly $300 million in assets were liquidated in DeFi protocols last week. Between January 22 and January 24, nearly 1,000 positions were liquidated on apps like Aave, Compound, and MakerDAO.