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Locked Assets in Ethereum DeFi Drops 10%
Reacting to wavy ETH prices, the total value of locked assets in Ethereum DeFi is down 10 percent from around $12.3 billion registered on Oct 26. DeFi is sensitive to prices because of the over-collateralization requirement by dominant lending and borrowing services. Decentralized applications like MakerDAO and Compound are one of the most popular, trailing Uniswap.
Details:
Rising ETH prices has an effect of pumping the total value of assets locked in DeFi. However, when prices fall, there tends to be a shock, and the number of assets under management drops because of the over-collateralization requirement instituted by some of these DeFi protocols. This is because digital assets are volatile. By Nov 3, there were $11.1 billion of assets in DeFi, down from $12.3 billion on Oct 26. During this time, the ETH price fell by 10 percent against the greenback.
Impact on the ETH Price:
Negative. DeFi liquidation feeds on the prevailing ETH price slump in a Domino Effect. This is because the general performance of DeFi is pinned on the success of ETH prices. There is presently no mechanism to counter this effect.
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