The total value locked in all of DeFi declined more than 30% since hitting its local high in December, data shows.
According to DefiLlama data, DeFi's TVL currently stands at $94.49 billion, following a steady decline from the Dec. 17 peak of $137 billion. The DeFi TVL also hit a recent low of $88 billion last month.
DeFi's surge in locked value parallels that of the overall crypto market, triggered by the Nov. 5 election of pro-crypto U.S. President Donald Trump. The current TVL of $94.49 billion is similar to levels observed around the time of the election, preceding a rapid surge above $100 billion.
"[The drop] illustrates how market uncertainty can significantly impact decentralized finance," said Kronos Research CIO Vincent Liu. "Both Ethereum and Bitcoin have experienced a decrease in active addresses over the past week, signaling a shift in user confidence amid price corrections, rising competition from other blockchains, and looming macroeconomic concerns."
The Trump-led crypto bull run faded during the first quarter as the U.S. President unwrapped sweeping reciprocal tariffs on trade partners, casting a shadow over the positive sentiment from the administration's earlier pro-crypto policies.
On top of tariffs, fears of persistent U.S. inflation and a prolonged pause in Federal Reserve rate cuts fueled worsening sentiment.
Bitcoin fell to trade around $83,000 from its record-high level of above $108,000 in January, while ether fell from its December high of $4,000 to its current price of $1,800.
HashKey Research Director Kevin Guo also attributed the DeFi decline to the harsh macroeconomic environment, saying that the DeFi ecosystem has not reached sufficient maturity.
"While the broader DeFi ecosystem has matured over the past few years, it still needs to mature further to build integrations with institutions and financial products at competitive rates and security assurances that licensed exchanges currently offer," Guo said. "Retail investors may find DeFi less accessible due to complicated interfaces, higher fees, and complicated custody practices, while seasoned traders still rely on the liquidity and tooling that are housed by licensed exchanges."
Liu of Kronos stated that continued innovation within the DeFi sector is "crucial " for the sector to regain its momentum, in addition to crypto price stability.
Liu added that for the time being, a potential reversal in Trump's tariff policies, and a positive U.S. consumer price index data next week may contribute to DeFi's rebound through a broader market recovery.
Despite short-term fluctuations, DeFi maintains a strong long-term position for investors, according to LVRG Research Director Nick Ruck.
"DeFi is positioned for potential long-term gains as a relatively stable source of return for investors, especially as regulators around the world warm to institutions integrating blockchain technology and RWA assets into their business models," said Ruck.
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