Complete analysis of the TVL crash in DeFi: Ethereum impacts negatively

The total TVL of DeFi has collapsed below 90 billion dollars, marking a -35% from the $140 billion in December.

The collapse of the price of Ethereum is weighing heavily.

Summary

• Analysis of the TVL of DeFi
• The problem of Ethereum
• The collapse of the Ethereum (ETH) price
• The end of the Trump trade

Analysis of the TVL of DeFi

The so-called TVL (Total Value Locked) of DeFi is the dollar equivalent of all assets locked in various DeFi protocols.

It concerns thousands of protocols on dozens, or hundreds, of different chains.

The bulk is concentrated on Ethereum (51%), while all the other chains combined do not reach half of the total value.

In second position is Solana (7.5%), experiencing significant growth in recent months, and even in third position is Bitcoin (6%) thanks especially to the Lightning Network.

Only BSC exceeds 5%, in addition to those already mentioned, while Tron stops at 4% mainly thanks to USDT. Berachain is on a strong rise with 3.6%.

The all-time high of TVL DeFi was reached in 2021, at nearly 180 billion dollars.

During the great bear-market of 2022/2023, it collapsed to 36 billion, and the fear is that in 2025 a somewhat similar collapse might occur.

The next peak was 138 billion dollars reached on December 17, 2024, while yesterday it fell below 88 billion.

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The problem of Ethereum

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Since the Ethereum chain still dominates the DeFi TVL unchallenged, the collapse of the ETH price is playing a key role, although other assets are also present in the Ethereum TVL on this chain, such as USDT, USDC, and DAI.

The maximum peak reached by the price of ETH at the end of 2024 was $4,100, touched on December 16, which was not coincidentally the day before the peak of the TVL.

Since then, however, there have been four strong declines, so much so that yesterday it also fell below $1,900, with an accumulated loss in the last three months of 53% from the recent highs.

It is very likely that behind the 35% drop in the TVL of DeFi there is precisely this -53% of ETH, also because many assets locked in DeFi are stablecoins that do not lose value over time.

The collapse of the Ethereum (ETH) price

Until a few weeks ago, a short-term return of the ETH price below $2,000 was not considered realistic.

However, already on December 20, just four days after the last peak, it had dropped to $3,000, suggesting the hypothesis that it could have dropped even further.

The second crash occurred at the beginning of February, when it fell below $2,500, and the third at the end of February, when for a brief moment it fell below $2,000.

The real big problem is that this collapse does not seem to be over yet, so much so that yesterday for a very brief moment it even fell below $1,800.

Now it has bounced back to $1,900, but at this stage, there are no signs of a possible significant rise, at least for now.

The DeFi is suffering as a result, also because in addition to a -28% of ETH in the last thirty days, there has also been a -40% of SOL (Solana).

The end of the Trump trade

All this is essentially due to the end of the so-called Trump trande, or the bursting of the mini-bubble that inflated after the electoral victory of Donald Trump.

To tell the truth, however, if the current price of Bitcoin is still higher than those $70,000 from which the mini-bubble started to inflate, for Ethereum the situation is different, because at the end of October it was much higher than $2,000.

This discussion also applies to Solana, because before the Trump trade it was above $150, while now it has plummeted to just over $120.

All this indicates that if Bitcoin is essentially still holding, net of the mini-bubble burst, for altcoins the situation is still decidedly difficult, so much so that further losses cannot be ruled out.

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