DeFi exploits in April cause $13 billion in outflows

DeFi exploits in April have caused significant damage in the decentralised financial world. According to a report from Binance Research, the attacks have led to outflows of approximately $13 billion, sharply reducing the total value locked (TVL). Notably, the onchain leverage ratio has now reached around 38%, a level last seen in 2021.

Leverage ratio back to 2021 levels

The onchain leverage ratio measures the relationship between active loans and the total sum of active loans plus the TVL in lending protocols. The fact that this ratio is now returning to the level of early 2021 might sound like a recovery, but the underlying cause is actually worrying. Binance Research states that the increase is not due to a real rise in borrowing demand, but to the sharp decline in TVL caused by the exploits.

In other words, the denominator in the calculation is shrinking, causing the ratio to rise without any actual increase in borrowing. That is an important distinction, as it suggests that the DeFi sector is weakening rather than experiencing healthy growth in activity.

Deleveraging remains absent despite market decline

What makes the situation even more striking is that, despite the recent downturn in the market, no meaningful reduction of leveraged positions has taken place. Binance Research indicates that the expected deleveraging has so far failed to materialise, which could point to persistent risks in the system.

The chart published by Binance Research, based on data from DefiLlama, shows that after a low in 2023, when the ratio fell to about 27% to 28%, it has since steadily risen. That Binance Research is now highlighting this signal fits into a broader series of analyses by the company. For instance, another Binance product recently saw $143 million in daily trading volume, as previously reported. The DeFi sector therefore faces a dual challenge: restoring confidence after the exploits and ensuring that leverage declines in a healthy manner.