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DeFi TVL holds up despite crypto sell-off as yield seekers stay put

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Chart showing staked ether (DefiLlama)

Despite broad market weakness and waves of forced liquidations across crypto, DeFi’s total value locked (TVL) has proven surprisingly resilient — a signal that traders are still attempting to generate yields despite bearish sentiment flooding the crypto market.

Over the past week crypto majors BTC, ETH, XRP and SOL fell to multi-year lows, with ETH now losing 21% of its value over the past seven days alone.

But that drop off didn’t translate into outflows from DeFi protocols. Total value locked fell from $120 billion to $105 billion, a 12% downturn as it outperformed the market.

The 12% drop off can be attributed to dwindling asset prices as opposed to yield farmers rushing for the exits. The amount of ether deployed across the DeFi market has increased from 22.6 million ETH at the start of the year to 25.3 million, with 1.6 million ETH being added in the last week alone, according to DefiLlama.

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Chart showing staked ether (DefiLlama)

Chart showing staked ether (DefiLlama)

Onchain liquidations muted

In February last year the crypto market experienced a similar drop following Donald Trumps ascent to becoming U.S. president. Then, the DeFi market was far more fragile, with a mammoth set of $340 million in onchain liquidations on the cusp of being triggered.

This time around, the DeFi market is better collateralized with just $53 million in liquidatable positions within 20% of the current price. Positions on algorithmic interest rate protocol Compound only become at risk if ETH slides below $1,800, although the largest danger zone is between $1,200 and $1,400 — which contains $1 billion worth of liquidatable positions, DefiLlama data shows.

Resilience shows maturing sector

In previous cycles, the DeFi market was the first to implode. In 2022 investors succumbed to overly tempting yields on the Terra blockchain by staking the algorithmic UST stablecoin, only for the entire ecosystem to collapse months later during a market plunge that reduced the value of crypto assets backing the stablecoin.

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This led to contagion across all DeFi markets, with TVL dropping from $142 billion to $52 billion between April and June of that year.

This time around the downside risk is minimal, yields are steady and inflows are quietly increasing — suggesting the sector has matured along a backdrop of institutional adoption and broader market volatility.

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Crypto World

Argentina Blocks Polymarket as Crackdown on Prediction Markets Expands

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Crypto Breaking News

Court Orders Remedial Reflex

In Buenos Aires, a court directed regulators to impose tight controls of access. The telecom regulator ENACOM also liaised with the internet companies to shut down the site. Google and Apple were also asked to take the app out of their stores. The reason why these actions are taken is to restrict access to the users in the country.

This has caused regulators to tighten their belts due to apprehension caused by activity associated with inflation data. It was reported that the platform made predictions of Argentina’s inflation rate in February before it was officially released. Besides, authorities reported that the prediction was altered minutes before publishing. This chain of events triggered the need to further research how the platform functions.

Researchers came to the conclusion that the platform served as a web-based betting platform. Regulators also said it enabled the users to participate in wagering without licenses. Also regulators were worried about access by minors. These results resulted in even tougher steps to be taken against the platform.

Latin America’s Crackdown Continues

The move is in line with other actions taken by Colombia. Polymarket was later blocked in the country due to similar complaints raised against unlicensed gambling services. Therefore, Argentina became the second country to ban the platform in the region. Such a trend underscores the developing regional integration in the area of regulatory enforcement.

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Regulatory examination does not just end at Latin America; it extends to other markets. It has been reported that websites like Kalshi have been involved in court cases in the United States due to allegations of unregulated betting services. It has also been reported that unpaid wagers have been involved in cases of dispute that are associated with geopolitical activities. Regulators and legal authorities have paid more attention to such developments.

Polymarket has also addressed criticism by eliminating some of the markets. Additionally, the site has recently shut down a market for nuclear risk forecasts after being pressured by the publicity. More so, the shutdown was done through the high geopolitical tensions. This is in response to efforts to deal with concerns as the regulatory pressure persists. Argentina has imposed a nationwide ban on Polymarket following the discovery of unlicensed betting operations and a ban on platforms. The relocation is in line with the larger international desire to control prediction market sites and restrict illegal gambling solutions.

Risk & affiliate notice: Crypto assets are volatile and capital is at risk. This article may contain affiliate links. Read full disclosure

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US Lawmakers Introduce Bill to Crack Down on Prediction Markets War Bets

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Law, Congress, United States, Prediction Markets

Two Democratic lawmakers in the US Congress have introduced legislation in response to “government corruption” over bets on prediction markets platforms.

In a Tuesday announcement, Texas Representative Greg Casar and Connecticut Senator Chris Murphy said they had introduced the Banning Event Trading on Sensitive Operations and ​Federal Functions (BETS OFF) Act after several Polymarket accounts made “highly unusual bets” that a war between the US and Israel against Iran would begin.

Murphy said on March 4 that it was likely that people with “inside information” of US President Donald Trump’s plan to bomb Iran had made the bets.

“We shouldn’t live in a country where someone sitting in the situation room making decisions about whether to invade or to bomb, decisions about war and peace, life and death, that those decisions could be driven by the fact that they have hundreds of thousands of dollars riding on the decision,” said Casar.

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Law, Congress, United States, Prediction Markets
Source: Representative Greg Casar

The bill is the latest twist in US lawmakers’ efforts to crack down on prediction market platforms and accounts allegedly using insider information to profit from government actions. Last week, California Senator Adam Schiff introduced the DEATH BETS Act to prevent prediction markets platforms from listing events contracts related to war, terrorism, assassination and individual deaths.

Related: Arizona AG files charges against Kalshi over ‘illegal gambling‘

Platforms like Polymarket and Kalshi offer bets on a variety of outcomes, including sporting events and US politics. However, users betting on the specifics of the US-Israel conflict with Iran have ignited controversy in many areas of government. On Monday, a military correspondent with the Times of Israel said that he had received death threats over his report of the date when an Iranian missile had struck Israel, all “in order to resolve a prediction on Polymarket.”

War-related bets still live on Polymarket

As of Tuesday, Polymarket still offered users the opportunity to place bets on the outcomes of several potential decisions in the US-Israel conflict against Iran, including on whether the US would send ground forces into the country, when a ceasefire might happen, and changes to Iranian leadership.

“The promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society,” said Polymarket in a note on Middle East markets. “That ability is particularly invaluable in gut-wrenching times like today. After discussing with those directly affected by the attacks, who had dozens of questions, we realized that prediction markets could give them the answers they needed in ways TV news and [X, formerly Twitter] could not.”

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Kalshi, in contrast, offered event contracts related to the Iranian conflict but not on specific military actions, such as if the country might reach a nuclear deal with the US and whether Trump or other elected officials might visit Iran.

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