Ethereum Updates: $36B DeFi Outflow Highlights Security and Governance Issues Threatening Ethereum

The decentralized finance (DeFi) industry has recently experienced one of its steepest declines in months, with the total value locked (TVL) across leading blockchains dropping by more than $36 billion in the past several weeks, according to a

. This dramatic decrease has sparked renewed discussions about Ethereum’s (ETH) future as the primary DeFi platform, especially as ongoing security issues and decreasing institutional engagement add to the sector’s difficulties, as noted by .

The downturn, which started in early October, saw TVL fall from a high of $172 billion to roughly $136 billion by November. Ethereum, which remains the largest DeFi network, saw its TVL shrink by 13% to $74.2 billion, according to the

. and experienced even greater losses, each dropping 14%, while Smart Chain and Base also posted double-digit declines, as outlined in the . The sell-off was intensified by major security breaches, including a $120 million hack at , one of the sector’s most established platforms, as reported by . The exploit, which was traced to a rounding error in the protocol’s batchSwap function, highlighted ongoing weaknesses in DeFi’s system design and governance, as described in the .

Ethereum’s challenges go beyond just TVL. Although earlier this year saw increased institutional interest in staking and ETF inflows, that momentum has slowed. Data from Strategic ETH Reserve indicates that combined digital asset treasury fund (DAT) and ETF holdings dropped from 12.95 million ETH in October to 12.75 million ETH in November, according to Yahoo Finance. At the same time, Ethereum’s price has hovered around $3,600, with some analysts warning that further declines could push it toward the $2,600 support level, as reported by Yahoo Finance.

Still, not all indicators are negative.

founder Justin Sun, who has previously criticized , recently staked $154 million in ETH through Lido, signaling renewed optimism in the network, according to . His action follows similar moves by large holders, such as BitMine’s $69.9 million Ethereum purchase from and FalconX, as mentioned by . These developments point to rising institutional interest in staking and liquid staking derivatives, which provide returns while preserving liquidity.

DeFi platforms are also making adjustments in response to the downturn.

, the top liquid staking provider, has put forward a proposal for a token buyback program to help stabilize its governance token, following similar strategies by , as detailed in the . While Lido’s $10 million annual buyback limit is much smaller than Uniswap’s $450 million plan, it reflects a wider movement among DeFi projects to use revenue to boost investor trust, as explained in the .

Looking forward, some experts remain hopeful. 10X Research forecasts that Ethereum could be gearing up for a breakout in 2026, citing increasing

liquidity on the network and positive regulatory changes under the new U.S. administration, as discussed in . Meanwhile, Bitget Wallet’s stablecoin yield products saw a 523% increase in TVL during Q3 2025, highlighting strong demand for transparent, on-chain income, according to a .

As the industry weathers this volatile phase, the balance between security, institutional participation, and regulatory developments will likely shape Ethereum’s path forward. For now, the market remains attentive for any signs of recovery or further decline.