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DeFi on Polygon in Trouble, TVL Down 33% in 2 Months

Posted by
Robert Hoogendoorn

Leading MATIC token increased 25% in value during that time

DeFi on the Polygon blockchain is not having its most successful period, as the total value locked (TVL) dropped almost $1.7 billion over the past 2 months. This drop happens despite the presence of recognized brands like Aave, SushiSwap, and QuickSwap. 

While the DeFi sector slowly finds its way up, DeFi on the Polygon blockchain is slipping. The DeFi sector on Polygon has been in a downwards movement since late July, dropping from $4.84 billion mid-July to $3.16 billion mid-September. 

In the Spring of 2021 the blockchain flourished, attracting billions of dollars from investors looking to escape the gas fees on the Ethereum mainnet. In June the network peaked at more than $7 billion in TVL. Then the Iron Finance drama took place, and the TVL on Polygon has basically been dropping ever since. 

The drop in DeFi activity becomes even more clear when looking at the aTVL, or adjusted TVL. Because TVL can fluctuate a lot, aTVL is an average measured over a 90 period. Here we see that the aTVL on Polygon dropped from $2.89 billion in the middle of July to $988 million at the time of writing. That’s a drop of almost 60%.

Performance of native MATIC token

The native token for the Polygon ecosystem is MATIC. As a result, every DeFi protocol on the Polygon blockchain uses MATIC to some extent to create liquidity pools. While the TVL in the DeFi sector has been dropping, the value of MATIC has been relatively stable. 

A quick look at the MATIC token page on DappRadar shows that MATIC gained 2.86% over the past 30 days. However, the DeFi sector lost almost $1 billion in that same time frame. So despite the lack of DeFi hype, there’s still enough appetite for MATIC and the Polygon blockchain ecosystem as a whole.  

Lots of activity moving to gaming

After a massive summer in 2020, the DeFi space appears stagnant. Whilst there is no sugarcoating for the decrease in DeFi usage, the numbers are not particularly dire. In August, 641,000 unique wallets interacted with DeFi dapps, a 2% decrease from July’s numbers. However, the most important metric to assess the DeFi space shows better results. 

The DeFi industry’s Total Value Locked (TVL) stands at $142.1 billion at the time of this writing. This figure represents a 22% increase from the numbers seen at the end of July. It is important to mention that the aforementioned TVL considers 6 blockchains: Ethereum, BSC, Terra, Polygon, Solana, and Terra. 

Read the complete DappRadar Dapp Industry Report for August 2021 here.

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