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The collapse of Terra caused a decline in decentralized finance (DeFi) by $ 83 billion

The rapid decline of Terra algorithmically stable coin has reduced the total value of all cryptocurrencies by more than $83 billion as investors choose to find safer areas.

The collapse of TerraUSD, or UST, and its Luna token in early May sparked a massive outflow of DeFi, a decentralized financing tool that can borrow and lend in cryptocurrencies without intermediaries. According to industry tracker DeFi Llama, the total value blocked in all major protocols fell to $112 billion from $195 billion earlier this month.

The consequences of the collapse of Terra also caused large-scale losses to cryptocurrencies. Bitcoin and Ethereum, the two largest tokens, fell below key support levels earlier this month and have since struggled to recover, hovering just below $30,000 and $2,000, respectively. Bloomberg’s digital coin index fell 30% this month.

DeFi projects attract investors to buy their own tokens and deposit them to help order transactions for the main blockchain, a process known as staking. Instead, they are offered a return that exceeds the return of traditional financial products. Anchor’s main platform, which is responsible for much of the $40 billion in ecosystem value, advertised a yield of up to 20% before the collapse of the UST.

MakerDAO, DeFi’s largest shareholding project, fell nearly a third in the past month to $9.8 billion. Curve, a popular platform for exchanging stable coins, fell more than 55 percent to $9 billion.

Cryptocurrency research company Kaiko said in a note Monday that declining demand for rates in DeFi applications indicates a “strong outflow of capital from this area”, as evidenced by rising liquidity in Ethereum and bitcoin on centralized cryptocurrency exchanges.

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Source itc
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