Even as the value of DeFi assets is falling, Ethereum (ETH) staking has been thriving thanks to protocols like Lido and Coinbase’s staking service.
The crypto industry has suffered a number of setbacks over the past year, including the collapse of centralised crypto exchanges and services, which has also caused capital outflows from the DeFi market.
The total value locked (TVL) under DeFi protocols across different chains, according to statistics from DefiLlama, is currently less than $38 billion, a considerable decline from the TVL’s peak of $178 billion in November 2021.
Notably, the current TVL figure is even lower than the total value locked just after the fall of the centralised exchange FTX in November 2022, which resulted in a two-year low in the assets locked within DeFi protocols.
In April, the market did experience a recovery, with the TVL returning to a level of about $50 billion.
The metric has since reversed to below $38 billion, despite the fact that the underlying crypto prices have not substantially decreased throughout this time.
The $38 billion amount, though, excludes money held in liquid staking methods like Lido.
Lido’s TVL has significantly increased from $6 billion to $13.95 billion since FTX’s demise.
These protocols “deposit into another protocol,” as DeFiLlama claims, which explains why they are not counted in the overall TVL total.
The amount of Ethereum amassed by Coinbase’s staking service, which was introduced in September 2022, is also $2.1 billion, increasing the total amount of assets owned by such services to $20.2 billion.
Through pegged assets provided by the staking provider, such as cbETH and stETH, investors can stake their assets, earn yield, and still enjoy trading liquidity.
Investors may find this option more appealing than loan protocols like Aave, which require users to lock their tokens and may subject them to unwelcome protocol hazards.
Aave’s current yield rates for ETH and USDC are 1.63% and 2.43%, respectively, whereas Coinbase offers more profitable rates of 3.65% for ETH and 4.5% for USDC.
In the meantime, it’s important to take note of the recent decrease in TVL across a number of DeFi systems.
While Curve Finance’s TVL fell by 26% to $2.3 billion, Aave’s TVL dropped by 21% to $4.5 billion.
The hawkish monetary policy of the US Federal Reserve may be one probable explanation behind this drop.
In comparison to stablecoin yields in the DeFi industry, this strategy has increased the yields on short-term government debt, making it a more appealing option for investors.