Svmuureports that JPMorgan stated that persistent security vulnerabilities and a stagnation in Total Value Locked (TVL) growth are significantly diminishing the appeal of Decentralized Finance (DeFi) to institutional investors. The KelpDAO incident resulted in the evaporation of approximately $20 billion in TVL within days, exposing systemic risks within cross-chain bridges and collateral mechanisms. Attackers minted unbacked rsETH and used it in lending protocols, ultimately causing roughly $200 million in bad debt and triggering a cascade of impacts across the DeFi ecosystem.
Under the pressure of such risk events, capital is accelerating its flow into stablecoins. Analysts suggest that, similar to the traditional market's flight to cash during uncertainty, crypto users tend to hold more liquid assets like USDT in uncertain periods.
Furthermore, although DeFi's Total Value Locked (TVL) has recovered in USD terms, it has remained largely flat when denominated in ETH, reflecting a lack of genuine growth momentum. JPMorgan believes that security issues and structural fragility remain core obstacles hindering DeFi's scaling and institutional adoption. (CoinDesk)