The third quarter of 2020 saw DeFi take the crypto industry by storm, earning itself the nickname “DeFi Summer”. Fast forward three summers and DeFi has been left out in the cold, with Total Value Locked (TVL) across the space having dropped from nearly $180 billion to $40 billion – a drawdown of 78%.

Ethereum has remained the king of DeFi with a 57% market share, but it has not been immune to the outflows, with TVL falling both in dollar terms and Ether terms.

The reasons for this capital flight are numerous, from crypto-specific issues such as Terra, FTX, and the SEC to macroeconomic factors such as rising interest rates and trad-fi yields.

Ethereum has, however, fared better than many of its rivals, with the Merge and Shapella upgrades having been executed successfully. Additionally, there are positive signs in the form of a slew of applications for an Ether futures ETF and the fact that Ethereum has outperformed Bitcoin since the Merge last September.

While DeFi has been through the wringer, Ethereum continues to strive to tokenise real world assets and generate real world value. It just needs to hope that DeFi makes a comeback, and that the summer of 2020 was not a once-off event.