DeFi Faces Market Pressures While Bitcoin Startups and Platforms Pivot
In the first quarter of 2025, the decentralized finance (DeFi) sector saw both challenges and progress as the market adjusted to shifting economic conditions and continued innovation. While total value locked in DeFi protocols declined due to broader financial uncertainty and the aftermath of a major exchange exploit, early-stage investment in Bitcoin-focused startups grew significantly, and key platforms like Gemini and ParaSwap made strategic moves to position themselves for future growth.
DeFi Sector Shrinks Amid Economic Jitters and Bybit Hack, But AI and Social Dapps Shine in Q1 2025
The decentralized finance (DeFi) sector took a significant hit in the first quarter of 2025, with the total value locked (TVL) plunging to $156 billion, a 27% quarter-on-quarter drop, according to a new report by crypto analytics firm DappRadar.
The fall, which echoes broader market turbulence, was largely attributed to persistent macroeconomic uncertainty and the high-profile Bybit exchange exploit.
DappRadar’s April 3 report revealed that Ethereum, the leading blockchain for DeFi activity, saw its TVL drop 37% to $96 billion during the quarter.
Other major networks including Solana, Tron, and Arbitrum also faced sharp TVL contractions, each losing over 30% of their locked assets. Sui was hit the hardest among the top ten blockchains, with a staggering 44% decline in TVL, falling to just $2 billion.
The bearish sentiment was compounded by Ether’s poor performance during the same period. Ether (ETH) slid 45% to $1,820, shedding almost half of its value over the quarter as investors navigated a difficult economic landscape.
DappRadar noted that chains with higher DeFi withdrawal volumes and fewer stablecoins locked in their protocols suffered disproportionately, exacerbating the market correction.
However, it wasn’t all doom and gloom for the blockchain sector. The newly launched Berachain emerged as a bright spot in the DeFi ecosystem, defying the broader downtrend. From its mainnet launch on February 6 to the end of March, Berachain accumulated an impressive $5.17 billion in TVL, making it the only top-10 blockchain by TVL to post a gain during Q1.
While traditional DeFi struggled, user activity in artificial intelligence (AI) and social decentralized applications surged. DappRadar reported a 29% increase in daily unique active wallets (DUAW) for AI protocols and a 10% rise for social apps over the quarter.
The monthly average for DUAWs reached 2.6 million for AI-focused protocols and 2.8 million for social platforms, suggesting growing adoption and user engagement despite the sluggish market.
That contrasted sharply with DeFi and GameFi sectors, which both suffered double-digit declines in user activity.
According to DappRadar, the growth in AI was particularly pronounced, with the emergence of new AI agent protocols reshaping user behavior.
NFT Sector Contracts, But Prestige Remains
Non-fungible tokens (NFTs) also felt the pressure of the broader market downturn. NFT trading volume dropped 25% quarter-on-quarter to $1.5 billion. Yet, the sector still saw pockets of activity, with OKX leading all marketplaces with $606 million in NFT sales. OpenSea followed with $599 million, while Blur recorded $565 million.
Among collections, Pudgy Penguins emerged as the most traded NFT project of the quarter, with $177 million in sales.
Meanwhile, CryptoPunks continued to command prestige despite their relatively low transaction count. Just 477 CryptoPunks changed hands, generating $63.6 million in volume, highlighting their status as elite digital collectibles.
“When analyzing top collections, CryptoPunks remains a staple — its prestige remains intact even as price fluctuations make it largely inaccessible for the average user,” DappRadar noted.
Change in DeFi total value locked between Jan. 2024 and March 2025 (Source: DappRadar)
The first quarter of 2025 highlighted a stark divergence in blockchain adoption trends. While economic uncertainty and technical setbacks like the Bybit exploit dragged down DeFi and NFTs, emerging sectors like AI and decentralized social apps demonstrated resilience and growth.
The transition reflects a broader shift in user interest from speculative financial instruments to utility-driven, innovative use cases. As AI agents and social dapps continue to evolve, they could serve as the next frontier for mass blockchain adoption — even as traditional sectors recalibrate in the face of macro headwinds.
Bitcoin Startup Boom: Pre-Seed Funding Deals Surge 767% Since 2021 Despite Valuation Pressures
In related news, venture capital interest in Bitcoin-based startups is surging, even as macroeconomic uncertainty, regulatory confusion, and shrinking valuations continue to weigh on funding rounds.
According to a new report from Trammell Venture Partners (TVP), the number of pre-seed funding rounds for Bitcoin-focused startup companies has skyrocketed 767% since 2021—an extraordinary sign of sustained entrepreneurial interest in Bitcoin as a foundational technology.
In 2024 alone, Bitcoin pre-seed transactions increased by 50% year-over-year, and the number of unique startups funded rose 27.5% from the previous year.
The data, compiled by TVP, reveals a clear and growing confidence in the Bitcoin ecosystem as a platform for innovation, even in the face of broader market headwinds.
Christopher Calicott, Managing Director of TVP, attributes the rise in early-stage startup activity to Bitcoin’s unmatched stability and decentralization.
“Many entrepreneurs across crypto are revisiting the Bitcoin stack as the long-term place to build their companies,” said Calicott. “It makes perfect sense: The objectively most secure, reliable, and decentralized blockchain is the obvious platform of choice.”
Indeed, while other chains have drawn attention for their programmability or speed, Bitcoin’s ironclad security and growing infrastructure have made it increasingly attractive to founders prioritizing durability and long-term sustainability. Layer-2 solutions like Lightning Network and emerging Bitcoin-native smart contract platforms have expanded the realm of what's possible within the Bitcoin ecosystem.
Valuations and Capital Raised Still Lag Behind Bull Market Highs
Despite the explosion in deal volume, the size of the funding rounds themselves has failed to reclaim the lofty heights of 2021.
TVP reports that total capital raised in Bitcoin pre-seed funding rounds dropped over 22% in 2024, while both median startup valuations and median deal sizes have declined steadily from 2021 to 2023.
Median valuations for pre-seed Bitcoin startups between 2021-2024 (Source: Trammell Venture Partners)
Though there was a slight rebound in round values during 2024, valuations remain well below their bull cycle peaks. TVP attributes this stagnation to lingering regulatory uncertainty in the US, particularly the unclear stance of the Securities and Exchange Commission (SEC) during the past administration.
The slowdown in funding amounts is not occurring in a vacuum. Broader macroeconomic forces have made venture capitalists more hesitant to deploy large amounts of capital into speculative sectors like crypto.
Fears of a prolonged global trade war intensified in early April, when US President Donald Trump signed a sweeping executive order that imposed a 10% baseline tariff on all imported goods. The markets responded swiftly, with risk-on assets—including equities and cryptocurrencies—suffering sharp declines.
In addition, persistent high interest rates and whispers of a looming US recession have led many investors to rotate out of volatile assets and into safer havens such as government bonds, gold, and cash.
As a result, crypto-focused VC firms have become more selective. Haun Ventures, for example, invested $1.5 billion into crypto startups in 2022 but has set a lower target of $1 billion for the first half of 2025, citing changed market dynamics.
What’s Ahead for 2025?
While 2025 may not witness the exuberant highs of the 2021–2022 venture capital cycle, some analysts believe the sector will still experience solid growth. Galaxy Digital has projected a 50% year-over-year increase in VC-backed crypto investments in 2025, even though the totals are unlikely to return to the peak levels seen in the last bull run.
Deng Chao, CEO of HashKey Capital, remains cautiously optimistic. Chao noted that “pro-crypto regulations in the United States would increase VC investment in the sector in 2025,” but warned that volatility tied to geopolitical instability could derail positive momentum.
TVP’s report echoed this sentiment, concluding that while capital may be flowing more slowly, interest in Bitcoin startups is undeniably strong—and growing stronger.
DeFi Faces Market Pressures While Bitcoin Startups and Platforms Pivot
In the first quarter of 2025, the decentralized finance (DeFi) sector saw both challenges and progress as the market adjusted to shifting economic conditions and continued innovation. While total value locked in DeFi protocols declined due to broader financial uncertainty and the aftermath of a major exchange exploit, early-stage investment in Bitcoin-focused startups grew significantly, and key platforms like Gemini and ParaSwap made strategic moves to position themselves for future growth.
DeFi Sector Shrinks Amid Economic Jitters and Bybit Hack, But AI and Social Dapps Shine in Q1 2025
The decentralized finance (DeFi) sector took a significant hit in the first quarter of 2025, with the total value locked (TVL) plunging to $156 billion, a 27% quarter-on-quarter drop, according to a new report by crypto analytics firm DappRadar.
The fall, which echoes broader market turbulence, was largely attributed to persistent macroeconomic uncertainty and the high-profile Bybit exchange exploit.
DappRadar’s April 3 report revealed that Ethereum, the leading blockchain for DeFi activity, saw its TVL drop 37% to $96 billion during the quarter.
Other major networks including Solana, Tron, and Arbitrum also faced sharp TVL contractions, each losing over 30% of their locked assets. Sui was hit the hardest among the top ten blockchains, with a staggering 44% decline in TVL, falling to just $2 billion.
The bearish sentiment was compounded by Ether’s poor performance during the same period. Ether (ETH) slid 45% to $1,820, shedding almost half of its value over the quarter as investors navigated a difficult economic landscape.
DappRadar noted that chains with higher DeFi withdrawal volumes and fewer stablecoins locked in their protocols suffered disproportionately, exacerbating the market correction.
However, it wasn’t all doom and gloom for the blockchain sector. The newly launched Berachain emerged as a bright spot in the DeFi ecosystem, defying the broader downtrend. From its mainnet launch on February 6 to the end of March, Berachain accumulated an impressive $5.17 billion in TVL, making it the only top-10 blockchain by TVL to post a gain during Q1.
While traditional DeFi struggled, user activity in artificial intelligence (AI) and social decentralized applications surged. DappRadar reported a 29% increase in daily unique active wallets (DUAW) for AI protocols and a 10% rise for social apps over the quarter.
The monthly average for DUAWs reached 2.6 million for AI-focused protocols and 2.8 million for social platforms, suggesting growing adoption and user engagement despite the sluggish market.
That contrasted sharply with DeFi and GameFi sectors, which both suffered double-digit declines in user activity.
According to DappRadar, the growth in AI was particularly pronounced, with the emergence of new AI agent protocols reshaping user behavior.
NFT Sector Contracts, But Prestige Remains
Non-fungible tokens (NFTs) also felt the pressure of the broader market downturn. NFT trading volume dropped 25% quarter-on-quarter to $1.5 billion. Yet, the sector still saw pockets of activity, with OKX leading all marketplaces with $606 million in NFT sales. OpenSea followed with $599 million, while Blur recorded $565 million.
Among collections, Pudgy Penguins emerged as the most traded NFT project of the quarter, with $177 million in sales.
Meanwhile, CryptoPunks continued to command prestige despite their relatively low transaction count. Just 477 CryptoPunks changed hands, generating $63.6 million in volume, highlighting their status as elite digital collectibles.
“When analyzing top collections, CryptoPunks remains a staple — its prestige remains intact even as price fluctuations make it largely inaccessible for the average user,” DappRadar noted.
Change in DeFi total value locked between Jan. 2024 and March 2025 (Source: DappRadar)
The first quarter of 2025 highlighted a stark divergence in blockchain adoption trends. While economic uncertainty and technical setbacks like the Bybit exploit dragged down DeFi and NFTs, emerging sectors like AI and decentralized social apps demonstrated resilience and growth.
The transition reflects a broader shift in user interest from speculative financial instruments to utility-driven, innovative use cases. As AI agents and social dapps continue to evolve, they could serve as the next frontier for mass blockchain adoption — even as traditional sectors recalibrate in the face of macro headwinds.
Bitcoin Startup Boom: Pre-Seed Funding Deals Surge 767% Since 2021 Despite Valuation Pressures
In related news, venture capital interest in Bitcoin-based startups is surging, even as macroeconomic uncertainty, regulatory confusion, and shrinking valuations continue to weigh on funding rounds.
According to a new report from Trammell Venture Partners (TVP), the number of pre-seed funding rounds for Bitcoin-focused startup companies has skyrocketed 767% since 2021—an extraordinary sign of sustained entrepreneurial interest in Bitcoin as a foundational technology.
In 2024 alone, Bitcoin pre-seed transactions increased by 50% year-over-year, and the number of unique startups funded rose 27.5% from the previous year.
The data, compiled by TVP, reveals a clear and growing confidence in the Bitcoin ecosystem as a platform for innovation, even in the face of broader market headwinds.
Christopher Calicott, Managing Director of TVP, attributes the rise in early-stage startup activity to Bitcoin’s unmatched stability and decentralization.
“Many entrepreneurs across crypto are revisiting the Bitcoin stack as the long-term place to build their companies,” said Calicott. “It makes perfect sense: The objectively most secure, reliable, and decentralized blockchain is the obvious platform of choice.”
Indeed, while other chains have drawn attention for their programmability or speed, Bitcoin’s ironclad security and growing infrastructure have made it increasingly attractive to founders prioritizing durability and long-term sustainability. Layer-2 solutions like Lightning Network and emerging Bitcoin-native smart contract platforms have expanded the realm of what's possible within the Bitcoin ecosystem.
Valuations and Capital Raised Still Lag Behind Bull Market Highs
Despite the explosion in deal volume, the size of the funding rounds themselves has failed to reclaim the lofty heights of 2021.
TVP reports that total capital raised in Bitcoin pre-seed funding rounds dropped over 22% in 2024, while both median startup valuations and median deal sizes have declined steadily from 2021 to 2023.
Median valuations for pre-seed Bitcoin startups between 2021-2024 (Source: Trammell Venture Partners)
Though there was a slight rebound in round values during 2024, valuations remain well below their bull cycle peaks. TVP attributes this stagnation to lingering regulatory uncertainty in the US, particularly the unclear stance of the Securities and Exchange Commission (SEC) during the past administration.
The slowdown in funding amounts is not occurring in a vacuum. Broader macroeconomic forces have made venture capitalists more hesitant to deploy large amounts of capital into speculative sectors like crypto.
Fears of a prolonged global trade war intensified in early April, when US President Donald Trump signed a sweeping executive order that imposed a 10% baseline tariff on all imported goods. The markets responded swiftly, with risk-on assets—including equities and cryptocurrencies—suffering sharp declines.
In addition, persistent high interest rates and whispers of a looming US recession have led many investors to rotate out of volatile assets and into safer havens such as government bonds, gold, and cash.
As a result, crypto-focused VC firms have become more selective. Haun Ventures, for example, invested $1.5 billion into crypto startups in 2022 but has set a lower target of $1 billion for the first half of 2025, citing changed market dynamics.
What’s Ahead for 2025?
While 2025 may not witness the exuberant highs of the 2021–2022 venture capital cycle, some analysts believe the sector will still experience solid growth. Galaxy Digital has projected a 50% year-over-year increase in VC-backed crypto investments in 2025, even though the totals are unlikely to return to the peak levels seen in the last bull run.
Deng Chao, CEO of HashKey Capital, remains cautiously optimistic. Chao noted that “pro-crypto regulations in the United States would increase VC investment in the sector in 2025,” but warned that volatility tied to geopolitical instability could derail positive momentum.
TVP’s report echoed this sentiment, concluding that while capital may be flowing more slowly, interest in Bitcoin startups is undeniably strong—and growing stronger.