JPMorgan: Security Vulnerabilities and Stagnant Growth Diminish DeFi's Institutional Appeal

According to Odaily, JPMorgan has stated that persistent security vulnerabilities and stagnant TVL growth are significantly weakening the appeal of decentralized finance (DeFi) to institutional investors. The KelpDAO incident led to the evaporation of approximately $20 billion in TVL within days, exposing systemic risks in cross-chain bridges and collateral mechanisms. Attackers exploited the system by minting unbacked rsETH and using it in lending protocols, ultimately causing approximately $200 million in bad debt and creating a cascading impact across the DeFi ecosystem.

Under the shock of such risk events, capital is accelerating its flow into stablecoins. Analysts suggest that, similar to the traditional market's flight to cash during uncertainty, crypto users in periods of instability prefer to hold more liquid assets like USDT.

Furthermore, although the total value locked (TVL) in DeFi has recovered in USD terms, it has remained flat when denominated in ETH, reflecting a lack of genuine growth momentum. JPMorgan believes that security issues and structural vulnerabilities remain core obstacles to DeFi's scalability and institutional adoption. (CoinDesk)