DeFi Enters a Reset as TVL Hits Lowest Level Since February 2024

The TVL across DeFi protocols stood at about $71bn as of 11 Jun, according to DeFiLlama, down sharply from the $170bn seen at the market's 2025 peak.

Trading activity has also slowed with decentralized exchanges (DEXs) processing around $5.8bn in trades over the past 24 hours, while 30-day trading volume totalled about $186.2bn. That's well below the levels seen during the strongest periods of the market, when daily DEX volumes regularly reached the double-digit billions.

And the pullback has not been limited to a single blockchain. Ethereum, the largest DeFi ecosystem, had around $37.2bn locked in its protocols, down from nearly $93bn at its recent high, while Solana's TVL fell to about $4.6bn from more than $12bn.

In contrast, the stablecoin market remains near record highs at about $316bn in market cap as of 11 Jun, according to DeFiLlama, up sharply from around $250bn a year ago.

The diverging trends suggest investors haven't abandoned crypto altogether, but are becoming more selective about where they deploy capital. 

Experts told Sandmark that investors are beginning to favour strategies with stronger risk controls and more sustainable returns over speculative, yield-driven trades that have fuelled much of DeFi's growth in the past.

Yields no longer beat safer alternatives

Ben Nadaresky, chief executive of Solstice Labs, a DeFi infrastructure and product development company, said one of the biggest reasons for the slowdown is simple: DeFi no longer offers the yield advantage it once did.

"For two years, the pitch was that onchain yield beat the bank," Nadaresky said. "Right now, it doesn't even beat the bill, so rational capital walks."

He pointed to examples including Aave paying around 2.3% on USDT stablecoin deposits and Ethena's staked synthetic dollar, sUSDe, yielding around 3.5%, compared with Treasury bills yielding more than 4%.

Nadaresky said the decline in TVL reflects a combination of falling crypto prices, weaker trading activity as memecoin speculation cooled and demand for leverage faded, along with ongoing cybersecurity concerns. DeFi exploits have resulted in about $1.44bn in losses over the past 12 months, bringing cumulative losses across the sector to more than $16.5bn.

"Every one of those headlines taxes the whole sector, because a treasurer who can't distinguish protocol A from protocol B prices them the same," he said. "What the incidents have done is split the market. Capital didn't leave crypto, it left unaudited yield."

Investors become more selective

Meanwhile, Patrick Heusser, head of lending at Sentora, an institutional DeFi solutions and risk management firm, argued that DeFi TVL doesn't tell the whole story. 

"TVL is a useful metric, but it doesn't always tell you why capital is moving," Heusser said. "A significant driver of the recent slowdown has been a reduction in leverage and risk appetite across the market."

He said digital asset markets still rely heavily on leverage – the use of borrowed funds to amplify trading positions – and when that activity declines, it naturally puts pressure on trading volumes, borrowing demand and TVL.

Heusser also said investors have become more selective, increasingly focused on risk-adjusted returns rather than simply chasing the highest yields available. "I don't believe the decline in TVL necessarily points to a structural failure of DeFi. In many ways, the market is becoming more disciplined," he added. 

'A repricing, not a retreat'

Matt Fisher, chief executive of the Katana blockchain, told Sandmark the decline in DeFi TVL may look worse than it really is because much of the capital that flowed into the sector during the boom years was driven by incentives rather than long-term conviction.

"This is a repricing, not a retreat. A big share of the TVL that peaked near $150bn was mercenary capital farming token emissions; it was always going to rotate out the moment yields normalised, and it has," he said. 

He added that current activity is concentrated on the venues that generate real revenue rather than subsidised yield. "The headline decline overstates the damage because a chunk of that 'value' was rented, not resident," he said.

Fisher said that the recent wave of exploits has also changed how investors assess risk. "We shouldn't sugar-coat it – the run of exploits has been the single biggest tax on DeFi's credibility this cycle, and the industry earned that scrutiny," he said.  

Still, he argued that the market is maturing rather than collapsing. "Confidence isn't gone, it's just become a lot more discerning, and that's exactly what a maturing market should do," he said.