The Terra network ecosystem is currently experiencing a crisis that is not only reflected in the collapse of the value of its terra (LUNA) and terra USD (UST) cryptocurrencies, but also in its decentralized finance (DeFi) protocols. These platforms, with Anchor in the lead, had a capital flight of more than USD 24.9 billion.
According to data provided by the statistics site defillama.comTerra is currently the sixth network with the most funds blocked in its entirety (TVL). At the time of writing this article, that index was at USD 3,750 million, 87% below the TVL that the Terra protocols added seven days before. Compared to the last 24 hours, the drop is 71%.
To put numbers to these percentages, Terra DeFi had $28.67 billion in TVL for the first week of May. However, the figure decreased until it reached USD 12.9 billion on May 10, with the fall of UST and LUNA already completed, as reported by CriptoNoticias.
According to defillama.com, Terra has 29 decentralized finance protocols running on its network. Among these, Anchor Protocol is the most recognized.
The fall of LUNA and UST seems to “take away” other crypto assets as well, such as the avalanche cryptocurrency (AVAX), from the network that bears the same name. It happens that the Luna Foundation (LFG, the organization behind UST and LUNA) has 3.5% of its reserves in AVAX, which is equivalent to more than USD 69 million at the closing of this note. As it is feared that the LFG could liquidate these funds to overcome the crisis it is going through, the value of AVAX has fallen 27% in the last 24 hours and is trading at USD 34.8, according to data from CoinMarketCap.
Terra loses a place of privilege in DeFi
In January 2022, this newspaper reported on the growth of networks such as Terra, Fantom and BNB Chain (former Binance Smart Chain) in the world of DeFi. By the end of 2021, Terra was gaining more and more space and already exceeded USD 16,000 million in TVL.
After the first four months of this year, this ranked as the second most valuable network among decentralized finance, with 14% of the spectrum under its domain. However, everything collapsed in a couple of days. From May 8 to May 11, Terra went from 13.2% dominance in DeFi to just 2.69%.
Funds locked on Terra appear to have largely migrated to Ethereum. It is that the leading network in the DeFi field went from a dominance of 55% to 64% in a few hours. Other networks that outperformed Terra, following its collapse, were BNB Chain, Avalanche (even with the aforementioned depreciation of their cryptocurrency), Solana, Tron, Polygon, and Fantom.