The decentralized finance (DeFi) sector has faced significant challenges over the past year, resulting in a sharp decline in both total value locked (TVL) and the number of unique DeFi users.
Recent data from AltIndex shows that the total value locked in DeFi has declined significantly, dropping nearly 30% year-over-year. As of last week, the TVL stands at $38.5 billion. This decline follows a period of struggle for the DeFi market, exacerbated by recent bearish conditions.
DeFi activity started 2023 on a strong note, benefiting from a broader market recovery. As trading volumes and user numbers showed signs of improvement, market forecasts for 2023 and beyond became more optimistic. This positive momentum was welcomed by DeFi investors who were closely monitoring market performance.
TVL's Rise and Fall
DeFi Llama data shows that in the first quarter of the year, DeFi Total Locked Value (TLV) rose 14% to $47.15 billion, and then jumped to $52.8 billion the following month, marking the highest point of the year.
Since April, however, DeFi TVL has been on a steady downward trend. By mid-July, it had fallen 16% to $44.3 billion. In September, TVL reached its lowest point of the year at $37.5 billion. While the first week of October saw a slight increase to $38.5 billion, this is still reflects a significant 28% decrease compared to the same month last year.
Ethereum dominance declines
Ethereum continues to lead the DeFi market with a 54.5% share of the TVL. However, this represents a significant decrease from April, when ETH's market share exceeded 70%. Tron has shown remarkable growth, more than doubling its market share from 6.5% to 17.8%, securing its position as the second largest blockchain in the TVL. Binance Smart Chain (BSC) and Arbitrum follow with 7.3%, 4.5% and 2% TVL market share, respectively, signaling their growing importance in the DeFi landscape.
Analysis from the Dune Analytics platform shows a parallel decline in the number of unique DeFi users over the past year. In October 2022, there were approximately 2.7 million DeFi users worldwide. By January, that number had dropped to 2.53 million. Then, over the next four months, the number of unique monthly users spiked, reaching 3.8 million in May, a figure not seen since April 2022. However, the trend reversed, with the number of DeFi users falling to 2.51 million last month.
In summary, the DeFi sector has faced significant challenges, with both TVL and the user base experiencing significant declines over the past year. The future trajectory of the market remains uncertain, and stakeholders continue to monitor these developments closely.
