JPMorgan: DeFi still struggles to attract institutional capital after the KelpDAO shock

🧩 JPMorgan says DeFi’s institutional appeal remains limited by two core issues: repeated exploits and stagnant TVL growth. Even as the broader crypto market has recovered, TVL measured in ETH terms remains almost flat, suggesting weak organic growth.

🌊 The report uses KelpDAO as a clear example of contagion risk in DeFi. A bridge vulnerability quickly created unbacked assets, triggered bad debt on Aave, and caused tens of billions of dollars in TVL to leave the ecosystem within days.

🛡️ JPMorgan also notes that after each security shock, capital tends to move into stablecoins, especially USDT, due to deep liquidity and faster exit options. This shows that defensive behavior is still outweighing demand to keep capital inside DeFi protocols.

🧭 From a broader perspective, the report shows that DeFi has not yet solved its trust problem. If weaknesses in bridge security, protocol protection, and contagion control are not clearly addressed, large-scale institutional adoption may continue to slow.

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