Ethereum (ETH) staking has been flourishing through protocols like Lido and Coinbase‘s staking service even as the value of DeFi assets continues to decline.

Over the past year, the crypto sector has experienced a series of setbacks, including failures of centralized crypto exchanges and services, which has also led to capital outflows from the DeFi space.

According to data from DefiLlama, the total value locked (TVL) within DeFi protocols across various chains now stands at under $38 billion, a significant drop from the industry’s peak in November 2021 when the TVL reached $178 billion. 

It is worth noting that the current TVL figure falls even below the total value locked shortly after the collapse of centralized exchange FTX in November 2022, which caused a two-year low in the assets locked within DeFi protocols.

The market did witness a recovery in April, with the TVL rising back to approximately $50 billion. 

However, since then, the metric has retraced back to below $38 billion, even though the underlying crypto values have not experienced significant declines during this period.

Meanwhile, the $38 billion figure does not include funds locked in liquid staking protocols like Lido.

Since the collapse of FTX, Lido has seen a substantial increase in its TVL from $6 billion to $13.95 billion.

According to DeFiLlama, these protocols “deposit into another protocol,” which explains why they are not included in the total TVL tally. 

Likewise, Coinbase’s staking service, launched in September 2022, has accumulated an additional $2.1 billion worth of Ethereum, bringing the total assets held by such services to $20.2 billion.

Liquid staking allows investors to stake their assets and earn yield while still enjoying trading liquidity through pegged assets issued by the staking provider, such as cbETH and stETH. 

This alternative can be more attractive to investors than using lending protocols like Aave, which require users to lock their tokens and potentially expose themselves to unwanted protocol risks. 

As of now, Aave’s ETH and USDC yield rates are 1.63% and 2.43%, respectively, compared to Coinbase’s more lucrative rates of 3.65% for ETH and 4.5% for USDC.

Meanwhile, the decline in the TVL of several DeFi platforms over the past month is also worth noting. 

Aave’s TVL has fallen by 21% to $4.5 billion, while Curve Finance has experienced a 26% decline to $2.3 billion. 

One potential factor contributing to this decline could be the hawkish monetary policy of the United States Federal Reserve. 

This policy has resulted in higher yields on short-term government debt, making it a more attractive option for investors compared to stablecoin yields within the DeFi space.