August was not a very attractive month to trade on-chain financial options, and the massive liquidations bear witness to this. During that month, the lending sector on the Ethereum network experienced the largest liquidation since May 2021. The protocols suffered from strong investor apathy.
For the network, this is a significant blow that could continue, especially in September, a month of great financial pessimism. In any case, the activity shows that capitals are nervous about the prospects of a collapse in some key markets.
Ethereum lending sector empties amid ETH pullback
For the capitals that usually enter the Cryptocurrency market, the current context does not look attractive. Thus, during the month of August, the liquidations were of large magnitudes. According to data from The Block, the outflows accumulated a total of $436 million dollars. This is a figure only surpassed by the liquidations of May 2021. At that time, $670 million were withdrawn.
The August liquidations thus become the second largest in the entire history of Ethereum. This is a clear testament to the state of the project, which is also reflected in the demand for its native currency, ETH.
The world’s second-largest token by market capitalization has plummeted by more than 14.3% over the past month. At the time of writing, its price is just above $2,400 per unit, according to CoinMarketCap. The spot ETFs that represent it on the US stock exchange are also showing a noticeably poor performance.
However, everything points to the fact that the Ethereum lending sector will remain far from its best days. The macroeconomic conditions in the United States become a strong deterrent for capital not to take excessive risks by going to the crypto market.
Ethereum price threatens to lose the $2,400 support soon. Source: CoinMarketCap
Aave leads liquidations
One aspect worth highlighting about these liquidations is that they are mainly concentrated in the Aave protocol. In this loan-based decentralized finance protocol alone, liquidations reached $289 million during the month of August.
This is equivalent to a whopping 66.24% of all liquidations last month. Even if Aave’s outflows are counted alone, they would have completely outpaced sales of all other protocols combined for 26 consecutive months. This gives you an idea of the impact of the current bearish trend on this decentralized app.
Liquidations in Ethereum’s on-chain lending sector reached $436 million in August. Source: The Block
Other protocols with significant participation in these outflows were Compound, Morpho Blue, and Spark. The first of these, with $84.49 million, accounted for 11.12% of all liquidations in August. The other two had a smaller participation.
This complex reality is reflected in the collapse of the total value locked (TVL) on the Ethereum network. According to the DeFiLlama portal, from $56.8 billion on August 1, the TVL of this network fell to $47 billion on September 1.
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