DeFi Lending Market Suffers Second-Worst Month on Record as Crypto Investors Lose $431M in Liquidations

The massive bearish pressure took crypto investors by surprise, triggering liquidations in decentralized finance (DeFi). August is already the second-worst

Crypto investors faced massive bearish pressure, leading to liquidations in decentralized finance (DeFi), according to data from The Block. August is already the second-worst month for Ethereum-based lending protocols in terms of liquidations.

Specifically, investors have lost a total of $431 million, $285 million of which was liquidated on Aave – the largest DeFi lending platform by total value locked (TVL). Notably, Aave V3 saw the second-best day on August 6 in terms of USD inflows at over $303 million. The only day when USD inflows surged higher was on April 21, 2022, when investors deposited over $937 million worth of crypto on the newly launched V3 platform, moving from the older V2 version.

For Aave’s V3 platform, August is already the worst month on record in terms of liquidations.

The massive liquidations come after the worst crypto decline of 2024, during which Ethereum lost almost 40% in value over 10 days leading up to the first week of August. During this period, ETH found support at $2,325, marking the lowest level since early February. Since then, ETH has corrected to $2,733, gaining 10% over the last week.

The volatility increase also led to an increase in both inflows and outflows on Aave, as many investors rushed to add collateral to avoid liquidations. The volume of both token inflows and outflows on Aave’s V3 app increased to the highest levels since 2022.

Moreover, Compound and Spark have also experienced massive liquidation volumes. This increase in liquidations serves as a reminder to investors of the risks involved in DeFi, despite the DeFi lending market remaining active.

According to Token Terminal data, the daily volume of active loans has been recovering from $9.9 billion on August 7 to over $10.7 billion on August 13. Notably, the metric rose to nearly $13 billion on July 23, marking the highest level since May 2022.

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