Starknet TVL crashes 3.7x to $42M after getting 93% vote to become L1

Starknet got an overwhelming vote approval to become an independent layer 1 (L1) chain, but suffered a massive DeFi activity blow. The Ethereum L2 saw its total value locked (TVL) drop by 3.7x (73%) from $158M to $42M on 22nd October.

The crash was triggered by Extended, a decentralized perpetual futures exchange, which migrated from Starknet to Circle-backed Arc blockchain. The platform had a strategic partnership with Circle and sought higher performance.

Extended migrated $120M in TVL, suggesting that it was the sole driver of Starknet’s DeFi activity.

Similarly, Starknet’s stablecoin liquidity dropped by 75% from $147M to $37M over the same period. The bridged volumes also crashed, underscoring the dominance the Extended had in the L2.

Will Starknet hold up after 93% support for L1 migration?

That said, Starknet plans to transition from an Ethereum L2 to an independent L1. The Starknet team, led by Eli Ben-Sasson, first floated the idea in early October.

Ben-Sasson argued that Ethereum’s post-quantum plan is too slow and may undermine the chain’s security plans amid increasing double threats from advanced AI models and quantum breakthroughs.

A formal proposal for the same was put to a governance vote on 15th October. The proposal got massive 93% support, urging Starknet to research ways to become an L1.

Following the vote, Sasson said StarkWare and the Starknet Foundation will allocate resources to begin the research. He added,

$STRK will remain the token of the network. Any path to transition to an L1 will be brought to a community vote. This is a huge shift and a milestone, but the AI and quantum challenges ahead require it.

Despite the overwhelming vote approval, however, $STRK’s price chart was surprisingly negative.

Starknet’s $STRK reverses October gains

In early October, the L1 proposal sent $STRK rallying by over +120% from $0.05 to $0.12. However, what followed was intense profit-taking, triggering a 58% loss and effectively reversing October’s gains.

In fact, the pullback slipped below the EMA (exponential moving average) band. Simply put, $STRK flipped bearish and shed another 7% on 22nd October. Unless the broader market sentiment improves, $STRK could stay below the EMA bands for a while.

Final Summary

• Starknet TVL has crashed by 73% after Extended perps platform migrated $120M to Arc.
• Team plans to begin L1 research pathways, but $STRK reversed all of October’s gains.