According to the latest analysis data from blockchain analysis company Glassnode, with the arrival of the bear market, the price of ETH has fallen to a low of $1,030, a 75.2% drop from the all-time high of $4,808, causing the Ethereum DeFi market to experience a sharp decline. Leveraged, with more than $124 billion worth of funds vanishing into thin air in just six weeks, investors are currently losing heavily on spot positions, and possibly historically large realized losses.
The violent liquidation of DeFi protocol TVL is mainly due to two mechanisms:
- Leveraged and revolving lending positions accumulated in the market during the bull market are closed, either actively or through liquidation.
- The value of crypto collateral drops due to lower repricing of tokens locked in DeFi protocols, usually due to sellers arising from point 1 above.