Denver were 8th in defensive efficiency + 5th in defensive eFG% last season.
This year they have only ranked 16th and 14th in those respective categories ... despite only one/two changes to their first choice rotation (Dahntay Jones to Arron Afflalo + Lawson taking most of Anthony Carter's playing time).
There is no good reason for that type of decline. There is still way too much defensive talent on the floor for the Nuggets.
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Are they playing below average defense at the moment? Yes, they have been for some time, since the Kenyon Martin injury. Haven't got back in gear yet.
Have they been playing good defense most of the season? No, mediocre defense most of the way alongside some spells of slightly above average defense + the poor defense they played while Martin is out.
Does that mean Denver isn't able to play very good defense? I don't think so. Too much defensive talent on that roster to say that. They're a squad that is capable of upping their defensive performance in a considerable way during these playoffs.