Facts behind Cardano’s increase and decrease in TVL (ADA)

Cardano (ADA) has just spent a tough week in the DeFi market, and this project has also tried its best to maintain its position.

Since the proposed Alonzo Hard Fork upgrade plan in September 2021, development efforts at the IOHK, EMURGO, and Cardano Foundation had increased, culminating in late March when the blockchain’s TVL reached its new highs.

On March 24, TVL on Cardano reached $326M- an increase of nearly 38,500% compared to the $845,000 in TVL recorded at the beginning of the year.

The locked-in value growth in various dApps on this blockchain has challenged ADA’s overall price trend, steadily declining since its all-time high in September 2021. Since the beginning of the year, ADA has lost more than half of its value, down from $1.37. January 1 to $0.65 on May 31.

The ADA’s rising TVL and falling prices show us that the forecasts of interest to Cardano are not tied to price action. That interest has increased in the number of wire construction projects on Cardano and the number of dApps launched on this project. There were nearly 900 projects built on Cardano’s blockchain at the end of April, including DEX, the market, stablecoin, lenders, wallets, and NFT.

Despite a lot of activity and interest, Cardano did not avoid the fall of Terra and has seen both its price and TVL fall along with the rest of the market. However, the 65% drop in TVL seen by blockchain in the past two weeks is much more substantial than expected, raising questions about what caused this sharp drop.

Easy liquidity

Since the Alonzo Hard Fork launched in August 2021, 94 dApps have been found on Cardano. Out of the various DeFi protocols using the Cardano platform, five decentralized exchanges (DEXs) have driven most of its TVL since the beginning of the year.

Being the first trading protocols launched on the blockchain, the bustling Cardano community quickly used them. Minswap (MIN), SundaeSwap (SUNDAE), MeowSwapFi (MEOW), ADAX Pro (ADAX), and MuesliSwap (MILK) all saw a massive increase in liquidity at the end of March, seeing record volumes and engagement.

However, the quickly poured money into these protocols was also fast to exit.

According to DeFi Llama, ADAX Pro was the biggest loser in this sharp decline, losing 97.7% of its TVL between April and May. MuesliSwap came in a close second with an 86.7% drop in TVL, followed by SundaeSwap with its 79% drop in TVL.

MeowSwapFi and MinSwap shared the third place with a 74% reduction, while trading protocol WingRiders (WRT) posted a minor loss with a 54% reduction in TVL over two months.

These drops in liquidity have caused the TVL on Cardano to drop from its ATH of $326 million to $115.7 million in the final days of May.

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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