DeFi Llama: the total value locked across all DeFi protocols has dropped to ~$112B, down from ~$195B at the start of May before UST and LUNA collapse
Emily Nicolle / Bloomberg : Tweets: @emilyjnicolle Tweets: Emily Nicolle / @emilyjnicolle : DeFi projects have lost a collective $83bn since the start of May, almost halving the sector's total value locked. even major players are taking the hit from Terra's collapse, with MakerDAO down by almost a third and Curve down 55% in the last month https://www.bloomberg.com/...
Context & Ripple Effects
The May drawdown traces directly to Terra's implosion: after UST broke its dollar peg and LUNA slid to a penny, the collateral and confidence underpinning yield positions across DeFi evaporated, taking sector-wide TVL from ~$195B to ~$112B in under a month.
What makes this reading notable is that even protocols with no direct Terra exposure are bleeding — MakerDAO is down almost a third and Curve down 55% over the month — suggesting the shock propagated through shared liquidity rather than staying contained to Terra's own ecosystem.
First-order effects
- Liquidity providers and lenders are pulling capital out of DeFi en masse, with the sector shedding $83bn since the start of May and major venues like MakerDAO (-~33%) and Curve (-55%) absorbing outsized withdrawals.
Second-order effects
- Protocols built on composability inherit each other's stress: as Curve pools shrink, the stablecoin swaps and lending markets routed through them thin out, forcing correlated de-risking across platforms that never touched UST directly.
Third-order effects
- The pattern points toward a durable repricing of algorithmic-stablecoin designs versus fully collateralized ones — a shift later visible when stablecoin market cap clawed back to record levels by late 2024 (regaining the ground lost after Terra) while DeFi TVL settled far below its 2021 peak (hovering around $50–60B through mid-2022).
The trend: DeFi is consolidating around collateralized, blue-chip infrastructure as algorithmic stablecoin failures permanently reset how much capital the sector can lock.