DeFi hacks have triggered a return of leverage to 2021 highs.
The decentralized finance (DeFi) sector has recorded a sharp jump in the on-chain leverage ratio. This metric has returned to levels last seen in 2021. Analysts at Binance Research confirm this trend: on one hand, such changes traditionally signal an increase in systemic risks. On the other hand, the current dynamics are driven by a specific factor: a rapid decline in the volume of locked assets, rather than a rise in demand for borrowed funds.
Why DeFi leverage has returned to 2021 levels
The ratio clearly demonstrates 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. Malicious actors withdrew enormous sums from various projects. The most significant damage was suffered by two major platforms:
- The Kelp DAO protocol lost approximately $292 million due to a vulnerability.
- The Drift Protocol project also experienced serious exploitation by hackers.
Following these incidents, investors began massively withdrawing 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 about $13 billion," the report states.
As a result, the change in proportions occurred due to a decline in the volume of collateral. Traders did not take out more loans, but the overall asset base significantly shrank. Specialists at Binance Research emphasize that even after the local stabilization of the market, the volumes of margin positions did not decrease. Thus, the ecosystem retains increased sensitivity to potential liquidations. Any further drop 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 comment: The rise in the leverage ratio amid a falling TVL is a classic "bearish" signal. It points not to active lending, but to the market becoming more fragile. Investors should be extremely cautious: at the slightest price decline, we could see a cascade of liquidations capable of crashing even the value of stable assets.