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Since the peak of the DeFi explosion in the summer, due to the overestimation of the value of Bitcoin, a large number of Ethereum floating in too high space has been abandoned, and the soaring Bitcoin has suddenly stolen a lot of liquid capital shares.
However, despite this happening, the total dollar value locked in the DeFi application continues to climb, as if nothing happened. Does this indicate that distributed finance is fundamentally reasonable, or is this just a precursor to disaster waiting to happen?
Total lock-in value ignores market corrections
Just like Bitcoin’s performance, gaining a foothold and the possibility of preparing for a large-scale bullish breakthrough, 2020 is already an important year for the development of Ethereum and DeFi.
These Ethereum-based ERC20 cryptocurrencies have recently suffered a huge impact in the industry. As the prices of some cryptocurrencies have soared, the total value locked in DeFi applications has also surged, but in the summer, this hustle and bustle began to slow down. The value drops.
Yearn.Finance, Aave, Uniswap and some other projects plunged 60% or more from their summer highs, but something interesting happened in the process.
Data shows that the “lock-in total value” in DeFi continues to grow. As asset valuations decline, more funds are invested in DeFi applications.
Will TVL keep growing?
Even if the valuation returns to a normal level, the total locked-in value (TVL) can maintain a synchronized growth, which indicates that the fundamentals of the category (DeFi) are strong, which may indicate that this correction is healthy and may lead to significant future prices rise.
Or, this may also imply that the DeFi trend itself has not reversed, even if the upward trend of assets has reversed.
Top cryptocurrency analysts warned that despite the significant reduction in the number of cryptocurrencies in DeFi, the selling related to Year.Finance, Uniswap, etc. has not stopped.
Either because the price immediately rebounds and continues to soar, there will never be a major correction, or the growth of TVL may also bring disaster.
If the total lock-up of DeFi starts to fall and the parabola of this chart has an inflection point, you may see a major correction like other charts. When the DeFi fever is finally broken, and parabolic assets fall by as much as 80%, will the same statistics happen to TVL?