DeFi market rises after crash – between hacker attacks and new DeFi fund
In the past week, the DeFi market has suffered greatly. Not least due to a hacker attack. But the first DeFi fund issued lets us breathe a sigh of relief.
The recent rise in prices in the DeFi sector gives hope. Nevertheless, after a long upswing, things have gone downhill in the DeFi sector in recent weeks. The value of deposited assets BitQT in Decentralised Finance, for example, has shrunk by more than 8 billion US dollars in the past few days.
On 22 February, the DeFi sector peaked at $43.15 billion. Then it went down in parallel with the bitcoin correction. Most recently, the DeFi market hit a low of US$34.93 billion.
Many of the large DeFi projects lost double-digit percentages of their value last week. This was also the case for Chainlink with a loss of over 24.17 per cent, or AAVE with 23.9 per cent. However, the latest share price developments provide some breathing space. Uniswap was a particularly notable gainer, up 14.16 per cent. Meanwhile, Fantom (FTM) emerged from nowhere and put in a performance last week that saw the coin gain almost 180 per cent.
However, the market capitalisation of the entire DeFi sector shrank by more than $18.2 billion last week. Besides the general crypto market correction, a hacker attack could also be involved in the negative trend in the DeFi sector.
Hacker attacks on DeFi protocols have become a growing problem. The latest of these attacks took place just on 27 February – over 14 million US dollars in cryptocurrencies were stolen.
This is because Furucombo, an Ethereum-based transaction „batching“ protocol, suffered a hacking attack. Users have been asked to stop all authorisations.
„We have de-authorised the relevant components and believe the vulnerability is patched. But we advise users to remove the approvals out of pure caution,“ Furucombo said in a tweet.
„An attacker using a fake contract led the platform to believe that Aave v2 had a new implementation,“ DeFi expert Igor Igamberdiev said in a tweet. This, he said, resulted in all interactions with Aave v2 being „approved“ and sent to an address controlled by the hacker. Hsuan-Ting, the CEO of Furucombo, takes responsibility for the attack. Users should „not worry about losses“, he says.
Despite the many negative headlines, there was one announcement that could provide positive momentum, as the world’s first DeFi Index fund provides hope.
Stability through the DeFi Index Fund
On 17 February, Bitwise Asset Management announced that it had launched the world’s first DeFi Index Fund, as also reported by BTC-ECHO. This new Bitwise fund holds a portfolio of crypto assets that offer services in decentralised finance – most notably Uniswap. The selection of assets is subject to strict regulations. The allocations are thus checked for important risks, weighted according to market capitalisation, and rebalanced monthly. In addition, the fund is backed by Anchorage Digital Bank (ADB), the first regulated online financial institution in the US. Meanwhile, Anchorage collateralises $5 billion in crypto assets.
Bitwise does not trade this fund publicly. The DeFi fund is only available to accredited investors as a private placement. Nevertheless, many small investors can also enjoy the DeFi fund. After all, index funds are often the first gateway to a new market for institutional investors, and can be signals of market growth.
After a long rollercoaster ride last week, it is safe to assume that the DeFi market will recover. Recent price developments suggest an upward trend.