Ethereum Staking Thrives Amidst DeFi Assets’ Notable Slump: A Dual Reality in Crypto Sector

A juxtaposition of a thriving Ethereum staking landscape against a crumbling DeFi sector backdrop. Ethereum staking represented by flourishing, towering trees under a vibrant sky, DeFi segment symbolized by wilting flora under a dark, waning horizon. Use a surrealistic style, stark contrasts in lighting techniques - bright, warm for Ethereum and dark, cold for DeFi. Capture a mood of mixed optimism and anxiety.

In an intriguing twist of events, ETH staking is thriving via platforms like Lido and Coinbase’s staking service, even as the worth of DeFi assets noticeably shrinks. This surge comes despite several impediments that characterized the crypto sector over the past year, including the meltdowns of major centralized crypto exchanges and services, leading to considerable capital withdrawals from the DeFi sector.

Based on DefiLlama data, the present total value locked (TVL) under DeFi protocols across several chains amounts to less than $38 billion, showing a sharp fall from its November 2021 peak of $178 billion. Interestingly, the current TVL is even below the value shortly after the FTX exchange collapse in November 2022, which instigated a two-year low in the DeFi assets locked.

However, the market did register a recovery last April, with the TVL climbing back to around $50 billion. Though, the metric has now relapsed below $38 billion despite the underlying crypto values remaining fairly stable during this time.

On the other hand, key figures such as those from Lido’s liquid staking are omitted from the $38 billion calculation. Following FTX’s downfall, Lido recorded a significant jump in its TVL, from $6 billion to nearly $14 billion. Similar services like Coinbase’s staking service, launched in September 2022, added another $2.1 billion, raising the total value held to $20.2 billion.

Liquid staking permits investors to stake assets, receive yield, and retain trading liquidity through pegged assets issued by the staking provider. This feature could look enticing to investors compared to lending protocols like Aave, where locking in tokens pose potential protocol risks. It is noteworthy to mention that Aave’s current ETH and USDC yield rates stand at 1.63% and 2.43% respectively, in contrast to Coinbase’s more beneficial rates of 3.65% for ETH and 4.5% for USDC.

In conjunction, the decreased TVL of several DeFi platforms over the past month warrants attention. Aave’s TVL plummeted by 21% to $4.5 billion, while Curve Finance witnessed a 26% reduction to $2.3 billion. The hawkish monetary strategy by the United States Federal Reserve may have a role in these developments by offering higher yields on short-term government debt and providing a more appealing alternative to stablecoin yields in the DeFi landscape.

Source: Cryptonews

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