Cryptocurrencies in the decentralized finance (DeFi) sector suffered more this week than the broader cryptocurrency market. The biggest decline was seen in the governance token of the DeFi protocol Pendle, which fell over 20% during trading sessions on Tuesday and Wednesday, with short positions accumulating in hopes of further declines.
According to Defillama, the DeFi protocol experienced a significant drop in asset value of $3B. Analysts suggested that many users withdrew funds from the protocol instead of rolling over their positions at the end of the lock-in period in June. Pendle had also benefited from an airdrop and point farming earlier this year, which have recently ended.
Rob Heddick, General Partner at venture firm Dragonfly, noted that the future pool yields are not very attractive right now, so token holders decided to exit the market instead of continuing their participation. Meanwhile, Joshua Lim, co-founder of major trader Arbelos Markets, stated that there will be a lot of noise around Total Value Locked (TVL) in the short term due to the ending of certain point programs and upcoming mergers, including the Symbiotic-Ethena-Mellow partnership.
The struggles of the DeFi sector coincided with a lull in the cryptocurrency market, as BTC and ETH consolidated within a tight range below their March peaks. The second-largest crypto asset lost approximately 6%, shedding most of its recent gains since the odds of regulatory approval for U.S. spot ETFs surged in late May.