Despite major cryptocurrencies plunging to multi-year lows and triggering forced liquidations across the sector, the total value locked (TVL) in decentralized platforms has shown unusual strength. According to Oliver Knight, the DeFi market only slipped a modest 12% recently, moving from $120 billion to $105 billion in total value.
This moderate decline is primarily attributed to the depreciation of underlying asset prices rather than a massive exit of capital by users from the platforms. In fact, the amount of Ether deployed in protocols has continued to rise steadily, adding 1.6 million additional ETH during the last week of market trading alone.
Such accumulation brings the total Ether deployed to 25.3 million, reflecting persistent confidence from investors seeking to generate yields in a bearish financial environment. Thus, the behavior of yield farmers suggests that the DeFi market is being used as a strategic refuge to maximize asset holdings during the current market crisis.
Why does the on-chain liquidation risk remain currently low?
On the other hand, the financial health of the current ecosystem is significantly superior to that observed in previous cycles, where structural fragility caused rapid systemic collapses. Currently, there are only $53 million in positions at risk of imminent liquidation, representing a miniscule figure compared to the $340 million recorded in previous stress periods.
This improvement in collateralization levels indicates that users are managing their risks in a much more professional and conservative manner than in the past. Therefore, unless the price of ETH drops below critical levels in protocols like Compound, the system appears to be shielded against any immediate domino effect.
Furthermore, the sector’s maturity is evident when comparing the current situation with the Terra collapse in 2022, where a lack of real backing destroyed billions in value. Instead, the 2026 outlook shows steady yields and a quiet inflow of capital that underscores the growing institutional consolidation of these decentralized financial technologies.
The current stability of the DeFi market could lay the groundwork for a faster recovery once the volatility of major assets begins to subside globally. Consequently, investors should view this indicator as a sign of maturity, expecting the infrastructure to withstand external pressures without the catastrophic failures that defined the industry’s early years.
