The total value locked (TVL) in DeFi protocols saw significant volatility in the past week, dropping from $140.95 billion on Dec. 17 to $117.76 billion on Dec. 20 before partially recovering to $122.06 billion by Dec.26.

Meanwhile, the stablecoin market cap remained remarkably stable, hovering around $240 billion with minimal fluctuation since Dec. 17.

The divergence between TVL and stablecoin market cap is significant because it demonstrates that the TVL decline was primarily driven by the depreciation in crypto asset prices rather than a fundamental shift in user behavior or capital flight from DeFi protocols. Had users been actively withdrawing capital from DeFi, we would likely have seen corresponding movements in the stablecoin market cap.

The stability in the stablecoin market cap suggests that users maintained their positions rather than converting to fiat, which shows traders are still locked into the broader DeFi market despite price volatility. This also indicates that traders see price drops as temporary market movements rather than systemic risks. The slight recovery in TVL from Dec. 20 to 26 (+3.6%), while crypto prices remained suppressed, further supports this interpretation, suggesting some opportunistic capital deployment at lower valuations.

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