In recent days ethereum, the bellwether of the defi, has been hit by a blow to the crypto market. The chief reason for this is Terra’s UST stablecoin. Ethereum plunged earlier this week to a 52-week low of $1,700, a price that has not been seen since December 2020. Despite the fact that demand for the so-called “world’s computer” has since rebounded, at the time of writing, the price of this cryptocurrency was still trading at around $1,900. Although there are some important lessons to be learned from the recent, massive market volatility, at the heart of which are the problems of TerraUSD (UST). Having lost more than 95% of its market cap since last weekend, this once-popular stablecoin has imploded in a matter of days.
On defi ecosystem, the best metric to measure volatility of crypto currencies is ETH Price action. The price of Ethereum token influences the defi markets as well as various Defi Paltform tokens. The following chart shows the ETH Price action starting May 9th 2022, the fateful day on which Terra’s UST started depegging. The price of ETH dropped around 15% on 12th May when Terra’s LUNA started imploding and pulling ETH & BTC pricing along with it to the abyss.
Now let us check the activity of Sushiswap’s during Market Volatile conditions. The peak volatility was observed between May 9th 2022 and May 13th 2022 when Terra blockchain was exploring like a nuclear reactor. As you see in the chart below you see elevated activity of swaps and swap volume during May 9th to May 15th when every was in panic and every other lending app was liquidating leveraged positions.
The peak transaction volume of over 360 million USD was observed on May 11th with over 16000+ transactions performed in a single day.
While DEX were on fire, what was going on lending protocols? Lets us look at Sushi’s Lending protocol and see what is going on! Crickets!! Yes, its so silent like a dead night and you hear crickets. The number of lending transactions has fallen very badly recently and 4 transactions in a day was the peak we observed in the past 30 days. On 17th May, there were 4 transactions recorded in the Lending Market.