The massive bearish pressure took crypto investors by surprise, triggering liquidations in decentralized finance (DeFi). August is already the second-worst month for Ethereum-based lending protocols in terms of liquidations, according to data from The Block. Specifically, investors have lost a total $431 million, $285 million of which was liquidated on Aave – the largest DeFi lending platform by total value locked (TVL).
Compound and Spark have also experienced massive liquidation volumes.
Collateral was liquidated following the worst crypto decline of 2024, during which Ethereum lost almost 40% within 10 days leading up to the first week of August, ultimately finding support at $2,325—the lowest level since early February. ETH has corrected since then to $2,733, gaining 10% over the last week.
The increase in volatility has led to an increase in inflows and outflows on Aave, as many investors rushed to add collateral to avoid liquidations. The volume of both token inflows and outflows on Aave’s V3 app increased to the highest levels since 2022.
On August 6, Aave saw the second-best day in terms of USD inflows at over $303 million. The only day when USD inflows surged higher was on April 21, 2022, when investors deposited over $937 million worth of crypto on the newly launched V3 platform, moving from the older V2 version.
For Aave’s V3 platform, August is already the worst month on record in terms of liquidations.
The increase in liquidations reminds investors of the risks in DeFi. Despite these challenges, the DeFi lending market is still very active. Token Terminal data shows that the daily volume of active loans has been recovering from $9.9 billion on August 7 to over $10.7 billion on August 13. The metric rose to nearly $13 billion on July 23, which was the highest level since May 2022.
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