Ethereum News Today: DeFi's $36B Exodus: Security and Governance Flaws Undermine Ethereum

The decentralized finance (DeFi) sector has faced one of its most significant downturns in months, with total value locked (TVL) across major blockchains plummeting by over $36 billion in recent weeks, according to a BeInCrypto report. This sharp contraction has reignited debates about Ethereum's (ETH) long-term viability as the dominant DeFi platform, particularly as security breaches and waning institutional interest compound existing challenges, as reported by Yahoo Finance.

The decline, which began in early October, saw TVL drop from a peak of $172 billion to approximately $136 billion by November, with Ethereum—the largest DeFi ecosystem—losing 13% of its TVL to $74.2 billion, as detailed in the BeInCrypto report. Solana and Arbitrum fared worse, shedding 14% each, while BNB Smart Chain and Base also recorded double-digit declines, according to the BeInCrypto report. The sell-off was exacerbated by high-profile security incidents, including a $120 million exploit at Balancer, one of the industry's longest-standing platforms, as reported by BeInCrypto.

The breach, attributed to a rounding error in the protocol's batchSwap function, underscored persistent vulnerabilities in DeFi's architecture and governance models, as detailed in the BeInCrypto report.

Ethereum's struggles extend beyond TVL. Despite institutional interest in staking and ETF inflows earlier this year, demand has cooled. Data from Strategic ETH Reserve shows combined digital asset treasury fund (DAT) and ETF holdings fell from 12.95 million ETH in October to 12.75 million ETH in November, according to Yahoo Finance. Meanwhile, Ethereum's price has languished near $3,600, with analysts cautioning that further weakness could test support at $2,600, as noted in Yahoo Finance.

However, not all signals are bearish. Tron founder Justin Sun, a vocal critic of Ethereum in the past, recently staked $154 million worth of ETH via Lido, signaling renewed confidence in the network, according to CryptoBriefing. His move follows broader whale activity, including BitMine's $69.9 million Ethereum accumulation from Coinbase and FalconX, as reported by Blockonomi. These actions highlight growing institutional interest in staking and liquid staking derivatives, which offer yield while maintaining liquidity.

DeFi protocols are also adapting to the downturn. Lido DAO, the largest liquid staking provider, proposed a token buyback program to stabilize its LDO governance token, mirroring similar initiatives by Uniswap, as reported in the Yahoo Finance report. While Lido's $10 million annual cap is modest compared to Uniswap's $450 million plan, it reflects a broader trend of DeFi projects using revenue to shore up investor confidence, as detailed in the Yahoo Finance report.

Looking ahead, some analysts remain optimistic. 10X Research predicts Ethereum is positioning for a 2026 breakout, citing surging USDT liquidity on the network and favorable regulatory shifts under the new U.S. administration, as discussed in Coinpedia. Meanwhile, Bitget Wallet's stablecoin yield products saw a 523% TVL increase in Q3 2025, underscoring demand for transparent, onchain income, according to a Coinedition article.

As the sector navigates this turbulent period, the interplay between security, institutional adoption, and regulatory clarity will likely determine Ethereum's trajectory. For now, the market watches closely for signs of stabilization—or further decline.