The past week has been particularly tough for crypto investors. While cryptocurrencies are considered a volatile asset class, last week’s sell-off caused Bitcoin to lose around 40% in price alone. Even worse were the losses in the altcoins, which play a key role in the DeFi sector games. We take a look at the current events and see what effects can be expected for the DeFi sector.
Crypto market eroded due to corona
The financial markets have also reacted with the spread of the corona virus in Europe and the USA. Cryptocurrencies in particular recorded high book value losses. Bitcoin lost around 40 percent of its value on a weekly basis, with most altcoins the losses were even greater – especially with Ethereum. The comparatively young decentralized finance sector is now suffering from this development.
MakerDAO and its cryptocurrency DAI are particularly affected. DAI is a decentralized stablecoin based on the US dollar. To ensure the stability of DAI, smart contracts block deposited crypto tokens. As a rule, investors deposit ether to adequately cover the stablecoin.
Breaking the course presents challenges for MakerDAO
Since the ether price plummeted by up to 50 percent on Thursday, numerous positions automatically went into liquidation. A look at the distribution of the collaterals – the deposited cryptocurrencies – shows that around 20 percent of the investments were affected.