In brief

  • Total value locked in DeFi is marking new highs thanks to increasing crypto asset prices.
  • But the number of ETH locked in DeFi protocols has dropped 25% since October.
  • Calls to support the Ethereum 2.0 launch could be drawing deposits away from DeFi.

Total value locked in DeFi has reached new heights, but surging crypto prices have obscured a surprising new trend—the number of ETH locked in DeFi protocols is actually going down.

Total value locked (TVL) in DeFi protocols has grown to more than $14 billion since November 20, reaching a new all-time high of $14.39 billion on November 21. The rising price of Bitcoin and Ethereum has been the source of the continued TVL growth, with BTC prices increasing 34% and ETH up 54% since the start of November. 

Yet during the same time frame, more than two million ETH left the DeFi ecosystem and the number of Bitcoin stayed mostly steady, according to DeFi data aggregator DeFi Pulse.


DeFi, short for decentralized finance, refers to an emerging group of blockchain-based applications that provide financial services such as loans, interest on deposits, and asset swaps. Unlike traditional banks and centralized exchanges, however, DeFi applications execute financial transactions automatically using smart contracts

Total value locked has become a popular metric for measuring the broader DeFi ecosystem, because DeFi applications rely on customer deposits of cryptocurrencies like Bitcoin and Ethereum to function. Loans are issued from value locked in DeFi apps, and decentralized exchanges like Uniswap use locked value to facilitate trading between different crypto tokens.

ETH locked in DeFi applications peaked at 9.25 million on October 20, and since then has fallen more than 25%, even as TVL rose 23% based on increasing ETH prices. Bitcoin locked remained essentially even over the same period, going from 164,500 on October 20 to 168,500 for a TVL difference of about 0.5%.

So what’s the reason for ETH leaving DeFi? One culprit could be the impending launch of Ethereum 2.0, a new upgrade for Ethereum that will offer interest rewards for staked ETH and eventually a reconfiguration of the entire Ethereum blockchain. The Eth2 launch requires about 525,000 ETH to be sent to a deposit address before a planned December 1 launch date, of which more than 402,000—about 75%—has been contributed. This important Ethereum milestone could be drawing ETH out of DeFi contracts.

DeFi users could also be feeling more cautious as repeated hacks continue to plague many nascent financial protocols, with interest-earning DeFi projects from Akropolis to Value DeFi and even yield-optimizing Pickle Finance being attacked for millions in November alone. The inability of many DeFi protocols to prevent these costly exploits could be cooling off the whole ecosystem, especially with the Eth2 contract presenting a meaningful alternative for ETH holders.


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