On July 29, crypto analytics platform DappRadar released a report detailing how blockchain and crypto projects dealt with crypto contagion following the collapse of the Earth ecosystem in May.
According to the report, following the catastrophic collapse of Terra's UST stablecoin, $ 40 billion in retail and venture capital money was wiped out.
The spillover effect, known as cryptocurrency contagion, has hit lending companies like Celsius and brokers such as Voyager, Three Arrows Capital and BlockFi. Mass liquidations of leveraged positions and loans caused a rush to several platforms, which were forced to suspend withdrawals.
The decentralized finance sector was heavily affected because the Land FSO was an integral part of many lending and lending protocols. According to DefiLlama, the total value locked in DeFi plummeted by 64%, from more than $ 250 billion in December 2021 to just $ 90 billion today.
DeFi hit hardest
Unsurprisingly, DeFi is the one that suffered the most, as much of it relied on leveraged loans and mortgages, unrealistic returns, and heavy exposure to Earth. Now that all this leveraged speculation has been eliminated, a clearer picture of the ecosystem is emerging.
DeFi's TVL has risen since mid-June, when it dropped below $ 70 billion. The gains have been slow and steady, but the entire ecosystem hasn't collapsed and there have been many survivors.
MakerDAO (MKR) is once again the leading DeFi protocol with a market share of around 9,5%. Its collateral-backed stablecoin, DAI, did not falter during the FSO collapse and maintained its peg to the dollar.
The contagion of cryptocurrencies has also impacted non-fungible token projects (NFTs). Indeed, there was a decline in transaction and sales volumes in the first half of the year. However, the markets are slowly stabilizing and are even showing signs of recovery.
Metaverse and game survive
Two sectors that did not suffer such a severe impact in the post-Earth period were the Metaverse and blockchain games. "Blockchain games have been the least affected by the turmoil," the report reads.
Blockchain games, or GameFi, use tokenized items and in-game currencies to power virtual worlds. The slight decline in activity suggests that users have been interacting with blockchain games at a similar pace, regardless of how cryptocurrencies contagion.
Metaversi such as Axie Infinity (AXS), Decentraland (MANA) and Splinterlands (SPS) have continued to attract attendees this year. Researchers concluded that Metaverse-related NFT projects have grown year-on-year and global interest remains strong:
"The NFT projects linked to the Metaverse are a beacon of hope, as they have recorded an overall increase in the volume of trade and the number of transactions, respectively 97% and 27%".
