DeFi Faces Liquidity Crunch as Exploits Deepen Market Turmoil

Total DeFi liquidity drops from $250B to $200B, marking one of the steepest contractions in recent months.

Ethereum, Solana, and BNB Chain each record double-digit TVL losses amid rising market volatility.

Balancer and Stream Finance exploits drain over $200M, deepening investor fear and liquidity stress.

Decentralized Finance (DeFi) has had liquidity drains from major networks and investor confidence weakening. Over the past week, top blockchain ecosystems experienced double-digit declines in Total Value Locked (TVL), marking one of the sharpest contractions in months

According to analyst Crypto Patel, “DeFi Meltdown: Liquidity Drains, Confidence Cracks. This week saw double-digit TVL drops across leading chains as market volatility hit hard.”

Data from DefiLlama shows that total DeFi liquidity fell from around $250 billion in mid-September to nearly $200 billion by early November. Ethereum, which dominates the sector, saw its TVL shrink by 14%, while Solana and BNB Chain each fell 12–13%

Moreover, Base and Arbitrum posted smaller but still significant weekly drops near 10%, showing that selling pressure affected every major network.

Market Shake-Up and Widening Losses

Ethereum continues to control the largest share of total DeFi value, yet its liquidity has thinned considerably. Solana and BNB Chain followed a similar trajectory, extending their downward moves from late October. Besides, rising market volatility encouraged capital rotation out of DeFi protocols into safer assets. Consequently, overall sentiment remains cautious as investors digest recent market shocks.

Additionally, smaller networks like Base and Arbitrum provided limited relief. Their modest declines, though smaller, still contributed to the overall contraction in total liquidity. The synchronized downturn across all five chains confirms a broad withdrawal of funds, reflecting mounting fear among participants.

Security Breaches Intensify Market Stress

The liquidity collapse worsened after two major security incidents rattled the DeFi community. On November 3, Balancer—a long-standing DeFi protocol—lost over $120 million in a sophisticated exploit

The team later explained that the attack stemmed from a rounding error in the upscale function for EXACT_OUT swaps within its batchSwap feature. “Attackers were able to exploit the incorrect rounding behavior… to manipulate pool balances and extract value,” the Balancer team stated.

Soon after, Stream Finance revealed that about $93 million in externally managed assets had disappeared. The platform halted all deposits and withdrawals while recovering remaining liquidity. Consequently, the shockwave spread to Elixir, which was forced to wind down its deUSD stablecoin operations.

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