JPMorgan: Security vulnerabilities and growth stagnation weaken DeFi institutions' appeal

Odaily Planet Daily News: JPMorgan states that ongoing security vulnerabilities and stagnating TVL growth are significantly diminishing the appeal of decentralized finance (DeFi) to institutional investors. The KelpDAO incident caused approximately $20 billion in TVL to evaporate within a few days, exposing systemic risks in cross-chain bridges and collateral mechanisms. Attackers minted uncollateralized rsETH and used it in lending protocols, ultimately resulting in about $200 million in bad debt and triggering chain reactions within the DeFi ecosystem.

Under the impact of risk events, funds are accelerating their flow into stablecoins. Analysis suggests that, similar to traditional markets shifting to cash for risk hedging, crypto users tend to hold more liquid assets like USDT during uncertain periods.

Additionally, although the total value locked (TVL) in DeFi has recovered in USD terms, it remains essentially flat when measured in ETH, reflecting a lack of actual growth momentum. JPMorgan believes that security issues and structural vulnerabilities remain core obstacles to the scaling of DeFi and institutional adoption. (CoinDesk)