DeFi leverage has returned to 2021 levels: analysis of the consequences of hacks
The ratio clearly illustrates the relationship between borrowed capital and margin positions relative to the total value locked (TVL). Currently, this indicator has risen to 38%, driven by a widespread drop in collateral volumes.
The decline began in the spring, when the sector faced a series of large-scale hacker attacks. Attackers withdrew colossal sums from various projects. The most severe damage was incurred by two major platforms:
- The Kelp DAO protocol lost approximately $292 million due to a vulnerability.
- The Drift Protocol project also suffered serious exploitation by hackers.
Following these incidents, investors began to massively withdraw capital, fearing for the safety of their savings. Consequently, the total value of collateral dropped sharply across many blockchain networks.
"Exploits in DeFi in April triggered an outflow of TVL of approximately $13 billion," the report states.
As a result, the change in proportions occurred due to a decline in the collateral base. Traders did not take out more loans, but the overall asset base significantly contracted.
My analysis emphasizes that even after a local market stabilization, the volume of margin positions did not decrease. Thus, the ecosystem retains heightened sensitivity to potential liquidations. Any further decline in cryptocurrency prices could trigger a chain reaction of forced position closures. The situation currently appears unstable, as the sector has not yet fully recovered from the spring security crisis.
Expert commentary: The rise in leverage amid falling TVL is a classic "red flag" for the market. We are not seeing a healthy increase in borrowing, but rather a "compression" of the asset base. This makes the system extremely vulnerable: even a small price movement could trigger a cascade of liquidations. Investors should exercise increased caution and reconsider their risk management strategies in DeFi.