Most major DeFi protocols are experiencing capital flight.
A massive cryptocurrency sell-off in the markets on Monday wreaked havoc on projects and entities alike. Across nearly all stablecoin borrowings on the popular decentralised finance, or DeFi, lending protocol Aave (AAVE), utilisation rates have fallen. Most notably, borrowings for Binance USD (BUSD) have dropped to just 30% from an all-time high of 80% in May.
The ratio of borrowed to deposited funds is known as the usage rate. Users are likely withdrawing en masse in light of Monda's sell-off to avoid liquidation, as borrowers are forced to provide digital asset collateral before taking out a loan on Aave. According to DeFi Llama, Aave's entire value locked has decreased from $33.51 billion in October to $8.11 billion now.
TVL in overall DeFi protocols has dropped by 55% since the end of April, owing to capital flight and a drop in the value of digital assets, among other factors. There are currently $115.7 billion in funds available, $72 billion of which is held on the Ethereum (ETH) blockchain. It's a drop in the bucket compared to the high TVL of $303.9 billion in November 2021.
Over the weekend, a cryptocurrency exchange stated that 260 employees, or 5% of its corporate personnel, would be laid off due to challenging market conditions. The business also announced last month that it was dramatically reducing rewards for its popular crypto-backed debit card. Annual cash-back APYs for spending have reportedly been reduced from 2% to 8% to merely 0% to 2% for cardholders with unstaked assets, according to reports.
BlockFi also stated that 20% of its 850-strong team would be laid off in an emotional message posted by founders Monday morning. In making the choice, the company emphasises the necessity to meet long-term profitability targets. Similarly, cryptocurrency exchange Coinbase has opted to keep its hiring freeze in place and has revoked employment offers to hundreds of new employees. Despite concerns about the exchange's bankruptcy, its CEO, Brian Armstrong, has stated that "funds are safe." In the midst of the continuing bad market, several prominent crypto firms are reportedly laying off 10% of their workforce.
