DeFi protocols and perpetual DEXs survived the largest liquidation events on October 10 and 11 with flying colors. This time, DeFi took advantage of fees and managed to keep liquidations under control.
DeFi and perp DEXs performed better after the October 10-11 market shakedown. The DeFi space, including perpetual DEXs, still saw liquidations but showed much more stability compared to the 2022 crash. As a cryptopolite reportedcrypto faced $19 billion in liquidations, the worst event since the FTX crash. This time, however, DeFi showed relatively limited crisis effects.
This time, DeFi has more reliable collateral, including those based on tokenized T-bills and more reliable stablecoins. ETH collateral is at a much more conservative price level, with limited liquidations. Currently, ETH has just under $1 billion in liquidable assets, starting at $1,548, well below market valuations.
Perp DEX open interest is trying to recover
Perpetual DEXs were hit the hardest, losing more than 50% of their open interest in liquidations. Open interest on all offender DEXs was $25.75 billion before the crash, later falling to a low of $13.71 billion.
Perp DEX’s value began to recover, bouncing from lows of $13 billion to $17 billion. Nevertheless, the liquidations damaged confidence in perpetual DEXs, after many traders were liquidated and lost their entire positions. | Source: DeFiLlama.
Within days, open interest recovered to over $17 billion in total, while Hyperliquid still held over $8.24 billion in open interest, based on data from DeFiLlama. Hyperliquid itself reported a slowed decline to $6.24 billion, compared to $15 billion during regular trading hours. Perpetual DEXs continue to carry more than $33 billion in daily volumes, with record activity over the past week. More than $264 billion was traded during the week of October 6-12, matching the weekly record for DEX activity.
The liquidations of the perpetrator DEXs occurred in the midst of a highly competitive saga, with old and new perpetrator DEXs attracting peak activity. The crash and on-chain liquidations were especially damaging as more retail traders attempted to hold leveraged positions, exposing them to excessive risk.
The top perpetual DEX tokens also took a hit, with weekly losses between 16% and 45% for the leading protocols. HYPE sank $38.71as the industry is still trying to achieve a recovery in locked value, open positions and token valuations.
Lending protocols, DEXs benefit from higher fees
DEX trading saw its highest weekly activity of over $177 billion during the week of October 6 to 12. The outlier result followed a general trend of DEX activity expansion.
Uniswap and PancakeSwap remained the largest hubs of activity, with no signs of distress. The recent DEX activity has also coincided with a surge of meme token trading on the Binance ecosystem.
Credit protocols experienced a bigger shock because of their underlying structure. Total escrow value remained at over $83 billion, with Aave in the lead. However, the total loan amount fell below $50 billion for the first time since August as users avoided the risk of opening loans.
In short, the annualized return of Lido’s sETH rose to 7.05% and later returned to the usual range. Overall, DeFi lending has reduced their outsized returns during previous market downturns, offering more conservative gains at a lower risk of liquidations.
