DeFi activity gets a boost despite market curveballs

Trade activity across DeFi roared to life over the weekend amid a major exploit that saw tens of millions drained from liquidity pools of decentralized exchange (DEX) Curve Finance.

Despite the threat of theft, renewed interest appears to be stemming from participants in search of fresh yield across meme coins, Chris Martin, Amberdata’s research head, told Blockworks.

“Based on the transaction volume and speed at which opportunities like BALD — which has since turned out to be a rug — find huge growth in market cap, we start to get a sense that folks are jumping in quickly.”

The Coinbase-backed layer-2, Base, is in a pre-launch phase and meant for developer use only, but it became a hot spot for speculative trading over the weekend, thanks to the BALD token, Blockworks previously reported.

In exemplary degen fashion, BALD is a play on Coinbase CEO Brian Armstrong’s naked scalp. After doubling in value upon its release on Sunday, BALD is down more than 92%, from a top of $0.09 to $0.006, CoinGecko data shows.

At its peak, BALD’s market capitalization reached $100 million as more than 7,500 addresses traded it — predominantly driven by a single address that continuously funneled liquidity to a pool from Coinbase’s leading DEX, Leetswap.

“Paired with high social media impressions and other fringe projects also seeing a sharp rise in volume, we get a sense that people are looking for opportunities when the overall market is faced with a slow-down,” Martin said.

Blue chip digital assets bitcoin (BTC) and ether (ETH) edged 1.8% and 2% lower over the past 24 hours to $28,900 and $1,830 as of 8:00 am ET. While both remain elevated this year — up 75% and 55% respectively — markets continue to exhibit uncertainty amid low levels of volatility.

Base liquidity bubbles and fades

The influx of users to Base lead to soaring activity on the new chain’s top decentralized exchange (DEX) by total volume, LeetSwap, across multiple liquidity pools, however the exchange said Monday it has paused trading after an inherent “security pause function” was triggered.

“As our DEX is forked from Solidly, our factory had a security pause function,” LeetSwap said in a tweet. “We noticed that some pool liquidity might have been compromised and we temporarily stopped the trading to investigate.”

It comes as blockchain security firm PeckShield reported Monday an exploit across liquidity pairs on Base amounting to roughly 340 ETH, worth some $630,000. Curve Finance, another decentralized exchange, was also hacked for $70 million following a separate liquidity exploit on Sunday. The two incidents are not considered to be linked.

Blockworks has reached out to clarify when the DEX expects to restore its trading services. Coinbase did not immediately respond to a request for comment.

LeetSwap handled $150 million in daily volume Monday, data from Dexscreener showed, though that has receded alongside a sharp drawdown in total value locked for the new L-2. TVL peaked at $41.2 million Monday, but has since fallen to $6.6 million, per DeFi Llama.

DeFi strikes back

Curve Finance’s exploit on Sunday, a $70 million drain from a number of ETH liquidity pools, is the latest string of thefts within the sector. The fallout appears to be contained — at least for now.

As a result of increased DeFi activity, aggregate total daily trading volume across DEXs clocked a seven-day high on Sunday, above $1.7 billion, data from Token Terminal shows. 

That’s the biggest increase since July 21 — a time when trade volume hit $7.7 billion following a flurry of activity associated with an exploit of Conic Finance’s for 1,700 ETH ($4.7 million).

Temporary turmoil aside, confidence in DeFi, as measured by the monthly aggregate average active users across leading DEX projects, has continued to trend north.

Top 20 DEXs based on monthly aggregated average active users, year to date | Source: Token Terminal

On average, month-to-month sector participants have swelled 7.7%, Token Terminal data shows. It’s worth noting that July’s total monthly active users (3.9 million) has bucked that trend for the first time this year, dipping 7% from June’s 4.2 million 

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