22% drop in Total Value Locked in DeFi
The current bubble facing the DeFi sector could be set to face its first major correction as the Total Value Locked (TVL) has fallen by 22% since reaching its peak. This trend was reported by analytic platform Unfolded via twitter. The chart showed a slight dip in the total locked in value of DeFi which until then had been on exponential rise.
First major DeFI correction down -22% from the peak pic.twitter.com/F6GPOmLVhZ— Unfolded (@cryptounfolded) September 6, 2020
Correction could be due to market drop-off
It is no surprise that the recent drop in TVL coincides with the recent bearish drop in the market. The crypto market is currently in a bearish stage with leading coin Bitcoin falling from $12,000 and testing the $10,000 support zone on several occasions.
This has predictably affected other cryptocurrencies with Bitcoin having a huge sway on the direction of the crypto market. There have been different speculations on what could have caused the slump of BTC with some analysts claiming that some miners from China could have sold off their stack of BTC leading to a dump.
While there are some that believe that the crypto market is correlated to the stock market that also experienced significant losses in the past few days.
DeFi TVL could continue to drop following recent sentiments
Beyond the general market sentiments for cryptocurrencies, the DeFi TVL could continue to drop following a week of controversy. This was heightened by the admission of the lead developer of SushiSwap, Chef Nomi, who sold a huge chunk of his SUSHI tokens.
This announcement led to huge criticism from the crypto community with several investors pulling their funds from the project leading to a crash of over 50% in its price in the last 48 hours. The SUSHI price declined to a low of $1,18 per SUSHI and rose again to $2,54 (+22%) at the time of writing.
Although Chef Nomi reiterated that he sold the tokens to concentrate on the project, the market sentiment is largely negative towards DeFi in the past 24 hours.
Despite this, the DeFi landscape has proven hard to predict with new projects increasing at a rapid rate.