One of the most important factors and tools in DeFi is TVL. TVL, or Total Value Locked, means how much is locked in smart contracts. Because DeFi is based on collateralized borrowing, we put up $100 to borrow $60 or $70 or $80. That $100 that we’re pledging as collateral, is TVL.
It’s an excellent indicator of sector and protocol health too. And thanks to LUNA and UST, which we’ve reported on extensively at my day job including an article or two that I wrote myself, the whole DeFi sector is suffering.
According to DeFiLlama, exactly one month ago before this LUNA mess started, the total TVL in DeFi was $205.81 billion and growing. Now, it’s only $106.24 billion.
That’s a reduction of $99 billion or almost 50% in 30 days. Ouch.
Stablecoins Suffering Too
Now UST was a stablecoin and stablecoins suffered a brief crisis of trust since they are supposed to be the safe havens in the crypto market. The place where we park our assets while waiting for the next time to buy.
Tether (USDT) is still the largest stablecoin with a $72 billion market value. While the largest and most popular, especially on exchanges like Kucoin, Coinbase and Binance, it is not the most trusted or safest in the eyes of most of the public.
There have long been rumors of Tether not being fully backed by fiat money and that they are running a fractional reserve system as banks do. They put that rumor to rest for now with one of the biggest stories of the week, their assurance opinion from an independent accounting firm. The opinion, which is important but less strict than an audit, says that assets exceed liabilities and the assets are $82 billion as of March, which put them at par with USDT supply.
But even USDT supply has shrunk due to this unraveling of UST. They were at $82 billion and are now at $72 billion. The only reasons for a reduced supply are:
Tether themselves took some money off the table to reduce risks
Holders of USDT cashed out for USD
Holders of USDT think the bottom is in for BTC, ETH and other blue chips and started buying
And it looks like it’s a combination of #2 and #3.
So USDT is starting to gain more respect in the market and more of a reputation for safety like USDC has due to its regular auditing of assets for US regulatory compliance.
The point of all this is the best stablecoins like USDT, USDC, BUSD, and DAI have shaken off the worst of this and are still a safe place to keep your money while you decide what to invest in next. Nothing has changed that. And if the last 2 weeks of craziness haven’t changed that, it likely won’t change before you make your next investment decision either.
Farm/Investment Of The Week
Remember this is not financial advice. Just pools and farms I find interesting and think the rewards exceed the risks.
Most people, even those that use Tether, don’t know that there is more USDT supply and usage on the Tron blockchain than on Ethereum.
And we can use that to our advantage by taking the Tron TRC-20 version of USDT and Tron’s new stablecoin USDD, and investing in the Sun.io 2pool. The 2pool features USDT/USDD and Sun.io run on Tron too so no bridging or wrapping of tokens is needed. Just a Tron compatible wallet for the tokens.
Plus the rate is between 19%-22% for holding 2 stablecoins.
These risks in this pool besides smart contract risk (for a bug or a hack) that can happen anywhere are:
Sun.io has not been operating very long
USDD is an algorithmic stablecoin like UST was and its design is subject to the same problems UST had including a depeg from the USD.
Sun.io in cultivating this pool is becoming the home for a large portion of USDD like Anchor Protocol was the home for most UST in the market.
We would counter these risks by watching the price and activity of USDD VERY closely and redeeming rewards regularly when you are able. USDT is the much larger and more stable of these coins so if you are not ready to buy something with your 19+% then convert your USDD to USDT and wait.
You cannot ‘set it and forget it’ on this one. It needs regular monitoring but you can make money with lower risk of price fluctuations if you monitor it regularly.