DeFi Daily Volume Dwindles to 7-Month Lows as Sector Endures Downswing

The D I sector is getting pummeled. Uh We're seeing it fall to seven month lows in terms of total in terms of volume because there's just been this massive drop off in activity in interacting with protocols, in protocols, not getting hacked. And so there's a couple of things that are feeding into this drawdown. One is the fact that protocols continue to lose money to hackers, whether that's through maybe more sophisticated North Korean attacks on bridges or just through really simple reentries tax that these protocols, these lending and trading markets really should be protected against. Well, they're not. And maybe that's leading to lower consumer confidence regardless. It's definitely leading to lower volumes. And it's not just being seen in the Ethereum ecosystem in Solan too. There's been a drop off now. I think it's worth noting that some protocols are having more success in weathering this storm than others in Salana. At least a couple of protocols are achieving higher volumes recently by rolling out new systems such as points that would incentivize people to use them. But it, it's not actually bringing new money into crypto, the crypto ecosystem into D I. It's just having the existing money sloshed from one place to the next. So that's not really a, that's not really a sustainable form of growth because it's not growth at all. So will I'll start with you? What's your take on the D I drawdown? Yeah. The reenter the attacks and other hacks are definitely a, a way of, uh, losing consumer confidence as you put it there. Danny, which probably one of my favorite phrases I've heard along with D five and this is like the realm of Degen, right? Where people kind of play to lose money in many instances. They're not too curious about that, but we are seeing a lot of loss and confidence in D I right now, I talked to ad five founder a few months ago about the secular decline in interest in D I as he put it. Um mostly that we're seeing total volume locked for TV L, the common metric for understanding how many crypto assets and the dollars value of those things are within the D I ecosystem and it's continually dropping over time. I mean, we're not seeing like the Steady cliffs or the, the cliffs that we saw last year in 2022 with the fall of so many of these ecosystems. We're just seeing money slowly slide out of these things and hacks and breaks of bridges and stuff like that does take money out a little bit more quickly than necessarily people withdrawing their money but overall, there is a decline in interest in D I, which is leading to a decline in the amount of value within D I. Uh we're almost back to that $1 billion market that you mentioned there, which back in uh believe it was early 2020 is when we broke through that $1 billion threshold. That was a huge deal for the D five market. The fact that, you know, that this many people were, were there willing to participate in this new uh leg for Ethereum, right? And it's a huge deal and now we're kind of going back down. I think this is just symptomatic. However, of the larger market, there's not a lot of interest in protocols, there's not a lot of interest in yield, there's not a lot of interest in the new app or adapt that's being designed and that's just where we are at in the cycle right now. And that's OK for right now, there's still people building stuff. A lot of treasuries actually took a good use of their money in this last cycle, moving into stable coins or assets that were more, more robust than the IC O era. I do think that we see this going back up right in the near future, but right now, it's definitely a secular decline. Jen. OK. I have some things to ponder and you too can ponder with me or just leave me to question the universe on my own. Um I think when I read this article, I thought about, you know, first of all, regulatory uncertainty. So we spoke about Binance, maybe, you know, on the sidelines waiting to see what happens with regulation in different jurisdictions. I feel like consumers, people who participate in the D A ecosystem, maybe people who are intrigued by different um aspects of D I are also maybe sitting on the sidelines waiting to see what happens with regulation, not only in the US but abroad as well. You know, I came up in some drafts of me a regulation in the EU we have the Gillibrand bill here in the US that's looking to define D I. And so I think, you know, people who operate in D I every day, Danny, like you mentioned, they're probably there and funds are being sloshed around, but I think newcomers might be just watching what's happening and waiting to see what happens from a regulatory perspective. Um And I don't know, I I know in our next story, we're going to talk about VC participation in D I. But do you both think that maybe V CS right now who may have bought up tokens who may have been investing in projects might be looking at things like A I for the exact reason that consumers might be like regulatory atmosphere? Yeah, really quick. I got fact check myself, I got my numbers confused. There's $1 billion around it with me. Well, I will, I will in a moment, there's $1 billion transactional volume, but TV L has dropped from 45 billion to about 43 billion in July. So definitely a significant slide there but not as significant as I was stating earlier. Uh Are people going to be becoming more interested in this? Is that generally your question or V CS becoming more interested? I'm I'm saying that maybe V CS who previously, obviously we're buying up tokens um, to participate in D I might be paused because of the regulatory atmosphere. And that's probably why we're also not seeing new money come into DFI because regulators are kind of looking at dia bunch of tokens were listed in the sec lawsuits against finance and coin base. There's bills being looked at in Congress. I don't know. Those are just my thoughts, my very mid informed thoughts. I have some thoughts as well, but give it to Danny first and I'll go, I will, I have equally mid informed thoughts. I love that mid informed, but I'll take, I'll take a whack at it anyway. Um I, I will say some of these VTS, they're sitting on the sidelines partly because they have to, they agreed to multi-year token lockups and their, their valueless tokens are just sitting there inaccessible for the time being as they wait to get their hands on it. And then with that moved toward A I, I don't know if that's specifically the reason why we're seeing, uh, DD I, in particular losing a lot of, uh, volume and a lot of value. But it's certainly a reason why some of the existing venture investors who aren't so eager to jump into risky cry investments are just as eager to throw their money at risky A I investments because it's the, the new bell of the Ball, so to speak. It's the hot new thing and there's a lot more upside that they see right now in betting on this brand new industry as opposed to the one that's associated with FTX and all these blowouts in the last year or so. Yeah, just to jump in there on what Jim was saying, I think they're still interested in di I do think that the D I market did make a mistake which the IC O did as well, which is, it's very difficult to launch a toke and sustain interest in it. It's very difficult to get the token economics, right? So a lot of these D I protocols became failures because of their early success with these tokens. Uh I still think that there's people who want to invest in this paradigm, for instance, just put out a notice uh this last week stating that they have a bunch of different topics that are interested in investing in the seed stage and that included some D I ask protocols mostly dealing with L two S and mev. So I think a lot of the infrastructure and the underlying stuff is where people are interested in as opposed to some of the bigger projects like we saw last cycle, like lending protocols or anything of that sort of nature.