Odaily Planet Daily reports that JPMorgan has stated that ongoing security vulnerabilities and stagnant 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 days, exposing systemic risks in cross-chain bridges and collateralization mechanisms. Attackers minted uncollateralized rsETH and used it in lending protocols, ultimately triggering around $200 million in bad debt and triggering cascading effects across the DeFi ecosystem.
In the wake of risk events, funds are rapidly flowing into stablecoins. Analysts note that, similar to how traditional markets shift toward cash during times of uncertainty, crypto users are increasingly preferring more liquid assets like USDT.
Additionally, although DeFi’s total value locked (TVL) in USD has recovered, it has remained largely flat in ETH terms, reflecting a lack of genuine growth momentum. J.P. Morgan believes that security concerns and structural vulnerabilities remain the core barriers to DeFi’s scaling and institutional adoption. (CoinDesk)