According to the latest DappRadar report, Ethereum dominance in the DeFi sector increased amid the market downturn, accounting for 69% of TVL (total value locked) in protocols. In addition, the document delves into the fierce competition among NFT markets, stating that OpenSea’s dominance continued to decline in Q2.
The current market crash significantly reduces user enthusiasm for DeFi activities. The number of Unique Active Wallets (UAWs) interacting with blockchain applications only averaged 2.11 million in Q2, down 11% from Q1 2022, but still recording a growth of 62% YoY.
Furthermore, the sharp drop in cryptocurrency prices was exacerbated by Terra’s crash and liquidity problems with CeFi players such as BlockFi, Celsius, Voyager, and Three Arrows Capital (3AC). After Terra failed, market capitalization fell 34%, sliding below the $1 trillion mark at levels not seen since Q4/2020.
Since the companies in trouble are primarily CeFi, there are concerns about centralized entities that hold custody of users’ cryptocurrencies. As demonstrated by the collapse of Celsius and Voyagers, exchanges that lend users money to generate high returns can only do so through exposure to risky DeFi projects.
Amid an escalating liquidity crisis, users’ funds are at risk as exchanges abruptly suspend withdrawals to protect dwindling liquidity.
Additionally, the report highlights the security concerns that are pervading the industry, with a total of $676 million in crypto stolen in Q2. A prime example is the Harmony bridge hack in June, which caused $100 million worth of ETH damage. Elrond’s dApp Arda and Maiar were hit by mining attacks of $127 million and $113 million, respectively, in the same month, according to DappRadar.
Despite downward pressure on the broader crypto market, the NFT remained solid during the quarter, partly because blue-chip collections’ losses recovered in June. In a way, it demonstrates its status as a potential store of value.
In the context of the NFT market increasingly competing for market share, OpenSea’s trading activity and revenue are somewhat lower.
“The decline in trading can be attributed to the drop in the market value of cryptocurrencies and rising competition in the NFT trading landscape. However, while the marketplace’s volume measured in USD has fallen around 70% since May, the volume in ETH is down by 55% in the same timespan.”
DappRadar points to Solana-based Magic Eden, Ebay’s knownOrigin, and Uniswap’s newly acquired NFT Genie aggregator platform as OpenSea’s main competitors. Additionally, with gas fees and relatively low barriers to entry, Solana – rather than Ethereum – has become a viable alternative to growing NFT projects.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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