Curve’s drop in DeFi rank a reflection of stablecoin market

At the end of the crypto bull market, Curve was solidly the number one place in decentralized finance (DeFi) for investors to tuck away funds to earn more. It has fallen to fifth place today, according to DeFiLlama.

Why it matters: Curve’s drop is largely a reflection of falling demand for stablecoins, the efficient trading of which is the focus of its protocol. Investors in decentralized finance (DeFi) make deposits onto different applications to earn passive income. How much they entrust to which projects reflects, in part, which ones they believe have the best prospects.

Flashback: This is quite a fall, considering the fact that much of the talk in late 2021 and early 2022 was about the so-called “Curve Wars,” the battle to scoop up Curve’s governance token, CRV.

• Projects wanted CRV because Curve had such influence over yield across DeFi. The more CRV a project owns, the more influence they held over Curve’s decision making.

In the weeds: Two crashes in stablecoins saw significant drops in total value locked up in Curve, neither of which it really recovered from.

• First, MIM (Magic Internet Money) crashed in late January after a sister-project was found to have been co-founded by someone many viewed with suspicion (it’s complicated).
• Traders dumped MIM so hard it set a record for trading on Curve.
• Then after Terra’s UST stablecoin collapsed, Curve saw another big exit.
• Terra had teamed up with Frax, another stablecoin maker, in a bid to use Curve to overtake the original decentralized stablecoin, DAI (DAI is fine).

What they’re saying: “I think there are some stablecoins which lost people’s trust due to UST drama,” Curve creator Michael Egorov tells Axios via email.

• UST disappeared for good. MIM’s market cap is down 99% since January. The FRAX market cap is down 40%, to $1.5 billion.
• The supply of MakerDAO’s DAI is down 14% from its May level, and MakerDAO is now #1 in DeFi once more.

For the founder of Frax, Sam Kazemian, it’s simply a reflection of a stablecoin exchange sinking as the market cap for stablecoins goes down in general. But there’s a silver lining, in his view.

• Stablecoin holdings go further now. “I always say, ‘A bear market is a bull market for stablecoins,'” he tells Axios.

🔭 What we’re watching: Curve’s token, CRV, has risen to $1.35, well over double its June low of $0.56.

• Someone thinks it’s making a comeback.