A significant downturn in the DeFi sector marked the first quarter of 2025, with total value locked (TVL) plummeting by $48.9 billion—a 27.5% decrease compared to the end of 2024. This is the largest quarterly contraction for the industry since the 2022 bear market, highlighting its ongoing volatility amidst global economic shifts and asset fatigue.
Ethereum, the leading smart contract network, bore the brunt of this decline with a staggering $40 billion in TVL lost as ETH prices plunged. This resulted in Ethereum’s DeFi TVL contracting by 35.4% or around $40 billion, shrinking its market share from 63.5% to 56.6%.
Ethereum’s decline was mirrored across major altcoin ecosystems like Solana and Base, which saw TVL drops of 23.5% and 15.3%, respectively.
The collapse in altcoins wasn’t confined to the Ethereum ecosystem. Memecoins, previously enjoying an inflated boom, suffered a sharp downturn following the infamous rug pull on Libra. This incident, triggered by investor losses estimated at $251 million, led to a widespread slump in the memecoin market.
Despite this, one notable exception emerged: Berachain, a newcomer that surged to $5.2 billion in TVL, becoming the sixth-largest DeFi chain. However, this anomaly couldn’t offset the overall decline in DeFi.
Meanwhile, Bitcoin served as a relatively safe haven amidst the market volatility. While it underperformed traditional assets like gold and U.S. Treasuries for the quarter, its dominance surged to 59.1%, reflecting investor sentiment seeking stability during uncertain times. This shift saw centralized exchange spot trading volumes drop by 27.3% from Q4.
The crypto sector’s Q1 serves as a crucial reminder: true value in the long run comes from fundamentals, not fleeting hype or short-term speculation.