DeFi TVL drops 30% since December peak, slipping below $95 billion

The total value locked (TVL) in decentralized finance (DeFi) has plunged over 30% from its December peak, reflecting ongoing market uncertainties and macroeconomic pressures.

According to DefiLlama, the current TVL in DeFi is $94.65 billion, a far cry from the $137 billion mark it reached on December 17 and one that has been steadily declining since. The TVL had reached a recent low of $88 billion last month before bouncing back slightly.

Late last year’s jump in DeFi’s locked value coincided with a general crypto market rally, largely stemming from the November 5 elections of pro-crypto U.S. President Donald Trump. The TVL of $94.49 billion is similar to the levels ahead of the election and before a run-up above $100 billion. But the latest drop is a sign of changing investor sentiment.

Vincent Liu, Chief Investment Officer at Kronos Research, stated that the recent DeFi TVL decline shows how much market uncertainty can weigh against decentralized finance. 

He further noted that Ethereum and Bitcoin have seen declines in active addresses in the past week, reflecting a loss of user confidence in price rectifications, intensifying competition from alternative blockchains, and ongoing macroeconomic concerns.

Macroeconomic pressures weigh down on DeFi

Trump’s crypto bull run fizzled in the year’s first quarter as the administration enacted sweeping reciprocal tariffs on key trading partners. This evolving dynamic dulled early excitement over the administration’s pro-crypto posture.

Besides trade, concerns over resilient U.S. inflation and the Federal Reserve delaying interest rate cuts have been holding back sentiment. Bitcoin hit an all-time high of above $108,000 in January and has now fallen to about $83,000. Likewise, Ethereum fell from $4,000 in December to its current price of $1,800.

Kevin Guo, a director at HashKey Research, noted macroeconomic challenges preventing the growth of DeFi. He explained that while the broader DeFi ecosystem has developed over the past few years, significant work remains to create not only DeFi-native products but also to integrate them into institutional financial products.

According to Guo, competitive rates, stronger security guarantees, and a streamlined user experience are essential prerequisites for opening the market to institutional participation.

Innovation and policy shifts may aid recovery

A few experts believe DeFi is still a strong long-term investment despite short-term volatility. Liu emphasized that innovation is “crucial” for DeFi to return to form, and the sector must continue to innovate.

He noted that a reversal of Trump tariff policies and a positive U.S. consumer price index (CPI) report due next week could trigger a broad market recovery that helps bring DeFi back to hype.

Nick Ruck, Research Director of LVRG, stated that DeFi is well-placed to be a long-term growth story. He further stated that as regulators worldwide become increasingly friendly to blockchain technology and incorporate real-world assets in financial frameworks, DeFi is emerging as a good long-term investment prospect with comparatively stable investor yields.

With ongoing challenges to the market, the future of DeFi will likely depend on regulatory equilibrium, macroeconomic patterns, and the ability of DeFi protocols to adapt to user demand.

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More