DeFi TVL Drops 27% in Q1 2025 Amid Economic Uncertainty and Bybit Exploit
1min read The total value locked (TVL) in decentralized finance (DeFi) protocols experienced a significant decline in the first quarter of 2025, falling by 27% to $156 billion. This downturn was primarily driven by broader economic uncertainty and the lingering effects of the Bybit exploit, a major crypto exchange hack. The value of Ether (ETH), a key cryptocurrency in the DeFi ecosystem, also saw a substantial decrease, dropping 45% to $1,820 over the same period.
Ethereum, the largest blockchain by TVL, was particularly hard hit, with its TVL falling 37% to $96 billion. Other major blockchains, including sui, Solana, Tron, and Arbitrum, also saw their TVLs slashed by over 30%. The decline in TVL was exacerbated for blockchains that experienced a larger volume of DeFi withdrawals and had a smaller share of stablecoins locked in their protocols. The only top-10 blockchain by TVL to see an increase was Berachain, which accumulated $5.17 billion between February 6 and March 31.
Despite the market fall, AI and social applications within the blockchain space saw a notable surge in activity and user engagement. The number of daily unique active wallets (DUAW) interacting with AI protocols and social apps increased by 29% and 10%, respectively, in the first quarter of 2025. This growth was accompanied by a rise in the monthly average of DUAWs interacting on AI and social protocols, reaching 2.6 million and 2.8 million, respectively. In contrast, DeFi and GameFi protocols saw double-digit declines in DUAWs.
The growth in AI and social apps was particularly pronounced in AI agent protocols, which DappRadar described as experiencing "explosive growth." These protocols are no longer just a concept but are actively shaping new user behaviors. This trend suggests that investors and users are increasingly interested in the potential of AI and social applications to drive innovation and create new use cases within the blockchain industry.
The decline in DeFi TVL and the surge in AI and social apps reflect the dynamic nature of the blockchain industry. As market conditions and user demands evolve, it is crucial for DeFi protocols and other blockchain applications to adapt and innovate to remain competitive. The first quarter of 2025 has been a period of significant change, with investors and users seeking out new opportunities and technologies that can offer greater potential for growth and innovation. The shift in investor sentiment towards AI and social applications highlights the growing demand for decentralized solutions that can leverage advanced technologies to enhance user experiences and create new opportunities for value creation.
