The decentralized finance (DeFi) sector has seen a significant contraction, with the total value of assets in DeFi protocols dropping by $45 billion. This loss wipes out all the market gains made since Donald Trump was elected as the President of the United States. Previously, DeFi’s total value locked (TVL) peaked at $138 billion on December 17, but has since declined to $92.6 billion as of March 10, according to analyst Miles Deutscher.
While Solana has faced criticism following a decline in its memecoin popularity, Ethereum has also experienced setbacks. Despite the sector’s evolution, Ethereum’s total value locked has decreased by approximately $45 billion from its high. This is occurring in a period when Bitcoin prices surpassed $109,000 on the day of Trump’s inauguration.
Ethereum’s price remains below its record-high of $4,787 from November 2021, despite developments such as the introduction of spot exchange-traded funds in the U.S. and Trump’s strategic Bitcoin reserve mandate.
In an unanticipated trend, around $1.8 billion worth of Ethereum, totaling about 800,000 Ether, left exchanges in the week of March 3. This represented the most substantial seven-day net outflow since December 2022. Normally, exchange inflows suggest selling pressure, while outflows might indicate a move toward long-term holding or deployment in DeFi applications.
This surprising outflow occurred even as Ethereum’s price dropped by 10% to a low of $2,007. According to IntoTheBlock, this pattern suggests that investors view the current market conditions as a strategic opportunity to purchase. Prior to March 3, Ethereum had been experiencing daily net inflows, marking a shift as investors began pulling their investments out of exchanges, potentially for repositioning.
Meanwhile, Ethereum’s proposed Pectra upgrade has faced hurdles. Although the upgrade aims to reduce congestion and lower fees, as well as improve efficiency and interoperability, its launch on the Sepolia testnet ran into issues. Errors were reported on Geth nodes, caused by a deposit contract that triggered incorrect events, though fixes are underway.
Hence, the market remains in a state of flux, as the DeFi sector and Ethereum navigate challenges posed by market dynamics and technological upgrades.
