Terra’s current crash seems to have undermined investor confidence in different main layer-1 (L-1) blockchains, knowledge reveals.
The blockchain’s worth imploded within the first two weeks of Could, and is now buying and selling at a fraction of the billions it was initially valued at.
However this implosion seemingly fuelled broader scrutiny in the direction of different L-1 blockchains, significantly these which had been valued equally to Terra. Merchants seemingly feared an identical implosion in different L-1s, given the continued weak point available in the market.
Coupled with a extreme crypto market crash up to now two weeks, a majority of tokens dumped by merchants got here from L-1 blockchains. Even within the DeFi house, L-1 protocols noticed the sharpest drop in whole worth locked (TVL).
Terra causes L-1 rout
Data from blockchain analysis agency Kaiko reveals that amid a broader crypto crash, L-1 blockchains, excluding Bitcoin, had been the worst performers within the first two weeks of Could. This development additionally occurred concurrently with Terra’s crash.
L-1 blockchains misplaced a median of 43% up to now two weeks, effectively above losses in layer-2 chains and Bitcoin. As compared, Bitcoin misplaced about 22%.
![L-1 blockchains lose the most value in May](https://cdn.coingape.com/wp-content/uploads/2022/05/17114948/l1.jpg)
In accordance with Kaiko, Avalanche (AVAX) and Fantom (FTM) had been the worst performers, dropping over 40% every in Could. Their DeFi TVL additionally noticed declines in an identical magnitude.
However Avalanche was seemingly an outlier as a result of its shut ties to Terra. The Luna Basis Guard holds about $66 million of AVAX tokens, which it may promote.
Crypto crash additionally causes concern
Whereas Terra might have invited extra scrutiny in the direction of L-1 blockchains, the broader causes behind their sell-off stays the identical. Crypto markets had been bought en masse by way of Could on fears of rising inflation, and extra rate of interest hikes by the Federal Reserve.
A bulk of crypto losses had been triggered simply after the Fed hiked charges in Could. One other wave of promoting strain got here after knowledge confirmed U.S. inflation will take for much longer to chill.
The crypto market has now misplaced about $400 billion in Could.
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