How DeFi reacts to market volatility: liquidation performance and valuation reflexivity

Starting from March 12th to March 23rd, there was a significant price drawdown in the crypto markets. BTC price decreased from $59,500 to $30,000 (-49.5%) and ETH dropped from $4,830 to $1,860 (-57.5%).  As a result of leverage being flushed out of the market, the total open interest of Bitcoin futures almost halved during that time period — from $20.4 billion to $12.8 billion.

For DeFi, a significant drop in prices highlights two questions: