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There Are Still Many Hacks, JPMorgan Says Institutional Interest in DeFi Is Hampered

JPMorgan states that repeated security exploits are the main obstacle for financial institutions to enter the DeFi sector. JPMorgan analyst, led by Nikolaos Panigirtzoglou, highlighted the recent cross-chain bridge hack on Kelp DAO as concrete evidence of industry vulnerabilities that have wiped out around $20 billion from the Total Value Locked ( TVL ) DeFi in just days.
​The hack resulted in the emergence of bad debt worth $230 million on the Aave protocol and triggered panic withdrawals. JPMorgan notes that the interconnected nature of DeFi protocols actually becomes a double-edged sword that accelerates the spread of systemic risk. Additionally, DeFi TVL measured in ETH has appeared stagnant since 2022, a metric that, according to analysts, indicates a lack of organic growth needed to attract long-term institutional capital.
​This uncertain condition has triggered a flight-to-safety trend, where traders and investors tend to shift their liquidity into Tether ( USDT ) as the main safe haven asset. JPMorgan concludes that although smart contract audits have increased, security gaps in blockchain bridges remain a major challenge. Without systemic improvements in security and capital efficiency, DeFi is predicted to struggle to gain significant liquidity allocation from the TradFi sector.