Decentralized Finance (DeFi) protocol vulnerabilities and attacks significantly impact markets. Exploits like flash loan attacks, oracle manipulations, and smart contract bugs have led to billions in losses—$3.1 billion stolen in 2022 alone, with 82.1% from DeFi protocols. These incidents erode investor trust, causing sharp declines in token prices and market instability. For instance, the 2022 Binance Bridge hack ($570 million) triggered widespread panic, amplifying volatility. Liquidity pools suffer as providers withdraw funds, reducing market depth. High-profile attacks also deter mainstream adoption, slowing DeFi growth. However, some argue these events drive innovation, pushing developers to enhance security and resilience. Despite this, the persistent threat of exploits continues to challenge DeFi’s credibility and market stability, highlighting the urgent need for robust safeguards.