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DeFi TVL Is Down A Staggering 80% From Its 2022 Highs, Is A Revival Possible?

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Back in 2021, the decentralized finance (DeFi) space experienced explosive growth which led to a rapid rise in total value locked (TVL). The TVL would continue to grow into 2022 and maintain a decent level even through the initial bear market triggered by the Terra collapse. However, the glory days are long over now and the DeFi TVL is barely holding up, to say the least.

DeFi TVL Crashes 78% In One Year

January 2022 was arguably one of the best months for the DeFi TVL when the metric rose to its highest level. At this point, there was over $212 billion worth of tokens locked across various decentralized finance protocols.

However, the same month would record one of the largest crashes in the TVL when it fell to $159 billion by January 31, 2023. This crash marked the end of an era for the sector as TVL would continue to plummet throughout the year 2022, exacerbated by the crashes of the likes of Terra and Celsius, and eventually FTX.

Fast forward to 2023 and the DeFi space has had a hard time keeping up. The further decline in TVL has brought it to one-year lows with the metric now sitting at $43.45 billion, translating to an 80% drop from its all-time high. This figure is also in line with the general bearish theme of the year with the highest the TVL has been in 2023 being $64 billion.

TVL falls 80% from peak | Source: DefiLlama

Falling prices across the space were a contributing factor to the decline, in addition to multiple protocols being exploited so far. Even though the rate of exploits is said to have slowed down in 2023, the likes of Multichain still lost $126 million. Curve also succumbed to an exploit that saw the attacker make away with over $60 million, although a good portion of the lost funds have since been reclaimed.