The first half of 2022 proved to be a challenging period for crypto investors, with the broader crypto market experiencing substantial declines, and the DeFi sector suffering heavily. The DeFi market cap experienced a staggering 74% drop during the second quarter of 2022. This sharp decline to the domino effect caused by Terra’s collapse. Due to its wide-reaching partnerships and interoperability with other protocols, the collapse triggered a chain reaction, severely affecting projects tied to Terra’s assets. In just three months, DeFi’s market cap plummeted from $142 million to $36 million, further emphasizing the ripple effect of Terra’s failure across the crypto space.
DeFi Retains Strong User Activity Despite Market Challenges
While DeFi’s on-chain activity witnessed a sharp decline, the sector retained a significant portion of its user base. Despite the overall drop in daily active users by over 34%, from nearly 50,000 to under 30,000 in Q2, certain events triggered surges in DeFi activity.
The first surge occurred in early May during the Terra collapse, as thousands of DeFi users turned to decentralized exchanges (DEXs) like Curve Finance and Uniswap to offload their LUNA and UST holdings, following interruptions in trading on centralized exchanges (CEXs). This led to a dramatic increase in trading volumes on these DEXs.
Another notable spike occurred in June, when the crypto lending platform Celsius restricted user withdrawals. In response, many traders flocked to DeFi protocols, causing a 24% rise in daily active users on those platforms.
Uniswap Remains Dominant in DEX Spot Volume
Uniswap maintained its dominance as the largest decentralized exchange (DEX) during Q2, controlling more than 60% of the total spot trading volume across the top 10 DEXs. Despite a drop in overall DEX spot volume from $446 billion in Q1 to $274 billion in Q2, Uniswap’s market share remained strong, underscoring its leading position in the decentralized exchange space.
