August 2024 was a month of great volatility in the crypto markets, marked by a cascade of on-chain liquidations, particularly on Ethereum. Total liquidations exceeded $436 million, with Aave accounting for 66% of these. This event was the second largest in history, second only to May 2021, when liquidations had reached 671 million. The 22% month-on-month decline in the price of ETH contributed to this, reducing the value of DeFi’s loan guarantees.
Liquidations occurred due to the falling loan-to-value ratio, which led to forced sales and further pressure on the ETH price. Despite this, September, historically a weak month for cryptocurrencies, saw a recovery in the outlook. However, investors and industry experts are taking a more optimistic view, emphasising the importance of a long-term perspective.
Meanwhile, the DeFi ecosystem continues to evolve, with stablecoins playing an increasingly central role. The volume of on-chain stablecoins on Ethereum reached an all-time high of $1.46 trillion, led by DAI, which recorded a volume of $960 billion. This growth indicates an increase in confidence in decentralised finance solutions. Despite the high volumes, some of these transactions could be related to wash trading phenomena.
Stablecoins, such as USDC and USDT, remain fundamental to the DeFi infrastructure, offering liquidity and stability in an often volatile market. At the same time, new players such as PYUSD are emerging, driven by traditional finance giants such as PayPal. The growing competition between stablecoins is stimulating innovation and improving market efficiency.
