Curve Weekly Cover - DeFi Stress Week

This was a rough week for DeFi.

The LayerZero exploit and the rsETH spillover triggered a broad risk-off move. Liquidity pulled back, trust assumptions were tested, and capital rotated away from anything perceived as fragile.

Against that backdrop, it makes sense to look at how individual protocols behaved under pressure. Below is a breakdown of what happened inside Curve over the past week.

Market Overview

This week tested the entire DeFi stack. The LayerZero exploit and the rsETH contagion from KelpDAO triggered a broad risk-off reaction and exposed fragile trust assumptions across protocols.

Against that backdrop, Curve held up with notable resilience:

• TVL declined only 1.9% to $2.05B
• crvUSD maintained a firm peg
• Minted supply expanded by 41%

This is not luck. It reflects structural design and liquidity depth.

Risk Reset in Motion

The market is repricing risk in real time:

• dependency on external protocols is being questioned
• collateral quality is under scrutiny
• security assumptions are being tightened

Curve DAO is already responding:

• voting to remove **Aave GHO from PegKeepers
• evaluating the shutdown of selected Llamalend markets

This is a defensive adjustment, not a reactionary move.

Yield Flows– Where Capital Is Moving

crvUSD Core Pools

Top unboosted opportunities:

• pmUSD / crvUSD – 11.4%
• USDT / crvUSD – 4.1%
• frxUSD / crvUSD – 3.9%
• USDC / crvUSD – 3.2%

Liquidity continues to cluster around crvUSD as a base layer.

High Yield USD Strategies

Higher yield comes with higher complexity:

• USDC / sJUSD – 20.4%
• ynRWAx / USDC – 17.1%
• ynRWAx / OUSD -15.1%
• sfrxUSD via Llamalend – 14.9%

RWA exposure and synthetic dollars are driving yield expansion.

ETH and BTC Positioning

ETH remains the dominant yield asset:

• alETH / WETH on Arbitrum – 9.6%
• weETH / WETH – 6.4%
• OETH structures – 5.6%

BTC remains more conservative:

• cbBTC / WBTC – up to 2.4%

Capital prefers ETH derivatives due to higher utilization and deeper integrations.

crvUSD – The Core Mechanism

Key metrics:

• Supply up 41%
• Price stable at $1
• PegKeepers actively deploying reserves
• DAO capturing profit

What drove this:

Rising BTC and ETH prices increased demand for leverage. More borrowing led to higher crvUSD issuance.

At the same time:

• Yield pools absorbed crvUSD
• supply shifted out of scrvUSD
• upward pressure on the peg appeared

This is a strong signal of demand driven stability.

Llamalend –Capital Rotation Signal

• TVL increased by 15.7%
• Borrowed volume up 20.1%
• Collateral up 25.6%

Users are reallocating from other platforms.

Drivers:

• lower borrowing costs
• stronger confidence in Curve infrastructure
• instability elsewhere

DEX Activity –Volatility Drives Revenue

Curve DEX saw a sharp increase:

• Volume up 235% to $2.14B
• Fees up 186% to $476K
• Swaps up 18.8%

Market stress directly translated into trading activity and fee generation.

stETH –Primary Beneficiary

stETH demand surged across pools:

• large increase in volume
• higher fee generation
• strong presence in derivative pools

This reflects a shift toward more trusted ETH collateral following the rsETH incident.

DAO Metrics – Positive Real Yield

• veCRV APR at 5.25%
• Inflation rate at 4.87%

Holders are earning above inflation.

This supports long term alignment and capital retention.

Flows and Positioning

TVL Inflows

• USDC / crvUSD saw a $96M increase
• PegKeepers added liquidity
• capital concentrated in stable pools

Fee Growth Leaders

• USDC / RLUSD
• ETH / stETH
• USDC / USDtb

Declining Segments

• traditional stable pools such as DAI / USDC / USDT

Demand is shifting toward newer structures.

Strategic Takeaways

1. Curve continues to act as a liquidity base layer
2. crvUSD is becoming a core mechanism within DeFi
3. Capital is rotating rather than exiting

Funds are moving toward systems that demonstrate resilience under stress.

Bottom Line

This was a stress test for DeFi.

While parts of the market showed fragility, Curve strengthened its position:

• stable peg under pressure
• growing supply and demand
• strong DEX performance
• positive real yield

This is a signal of durability, not just short term performance.

Conclusion

Overall, the week shows a clear pattern.Market stress did not shut activity down. It redirected it. Stablecoin flows, ETH derivatives, and lending demand all adjusted in response to volatility.For Curve specifically, the data points to continued usage across its core primitives, even as the broader market repriced risk.Nothing here suggests isolation from market conditions. But it does show how the system behaves when conditions deteriorate, which is the more relevant signal.