Silicon Valley Bank Implosion Causes DeFi Market Panic and Surge in Transactions
Silicon Valley Bank's (SVB) recent financial troubles have caused a ripple effect in the decentralized finance (DeFi) sector, as reported by DappRadar, a market intelligence platform.
The depegging of USDC from the US dollar was due to Circle, the stablecoin’s issuer, having $3.3 billion of its $40 billion reserves trapped in the collapsed Silicon Valley Bank. The sudden drop in USDC’s value caused panic among investors, resulting in a sell-off of DeFi contracts and a decrease in total value locked (TVL). TVL represents the total capital held within a blockchain’s smart contracts and is calculated by multiplying the amount of collateral locked into the network by the current value of the assets.
On March 11th, following the SVB crash and USDC depegging, the DeFi market experienced a significant drop in TVL, falling by 9.6% from $79.28 billion to $71.61 billion. However, the news of USDC reserve deposit held at Silicon Valley Bank being fully available to the public on March 13th helped stabilize the market. This announcement led to a 13% increase in DeFi TVL, reaching $81.15 billion.
DappRadar’s report also notes a surge in unique active wallets interacting with DeFi contracts. The number increased by 13% from 421,026 on March 8th to 477,094 on March 11th. Transaction count also increased by 23% from 1,356,483 to 1,668,992 during the same period.
The surge in DeFi activity was mainly driven by the decentralized exchange (DEX) Uniswap (UNI). Uniswap V3, one of the most popular DEXs, experienced a significant increase in unique active wallets (UAW), surpassing 67,000 on Saturday, March 11th, with a volume of $14.4 billion, the highest figure ever registered for V3. The 67,000 UAW were the highest recorded on a Uniswap Dapp since the summer of 2021. Additionally, Uniswap V3’s average transaction size on Saturday was $170,080, almost double the mean, indicating that Ethereum DeFi whales were highly active during the weekend.
Despite the volatility of the DeFi market, the sector continues to grow, with TVL reaching new highs. The recent dip caused by SVB’s collapse and USDC’s depegging demonstrates the sector’s vulnerability to market concerns. Still, it also highlights the resilience of DeFi in the face of adversity.