Original title: The Final Chapter of BTCFi: Observing the Ecological Decline from the Plummet of BitLayer
On August 27, the BTC ecological project BitLayer launched on Binance Alpha, but this once highly anticipated BTCFi star project marked the end of an era for the entire track with a sudden plunge.
According to CMC data, BTR opened at 0.1511, but within just a few hours, it plummeted to 0.077, with a daily decline of as much as 48.6%. As of today, August 28, the token is still down 44.3% from its historical high, with a trading volume of 60.3 million USD in the last 24 hours, and a trading volume to market cap ratio as high as 274%. This extreme speculative turnover rate exposes the awkward reality that the project lacks long-term holders.
What is more thought-provoking is that, despite the on-chain TVL remaining at a relatively high level of $429 million, the token price's steep decline clearly reflects the market's skepticism about BTCFi's ability to capture ecosystem value.
The sharp drop at the opening of BitLayer presents more than just a repeated phenomenon of "listing means peak"; it is also a microcosm of the entire BTCFi narrative transitioning from fervor to decline.
The Collective Downfall of Mainstream Projects
The BTC ecosystem has also given birth to many phenomenal popular projects, but they cannot hide the intrinsic flaws and narrative contradictions.
Merlin Chain: 3.8 billion TVL only 50 million left
As a former leader in the BTCFi sector, Merlin Chain's data changes are nothing short of dramatic.
The project attracted up to 3.8 billion USD in BTC staking within 50 days of its launch, with a peak TVL of 530 million USD, becoming the star project with the highest BTC Layer 2 TVL and user count at one point.
However, the reality is extremely harsh: according to DeFillama data, Merlin Chain's current TVL is only $50 million, a drop of over 90% from its peak. Its token Merl is hovering around $0.115, although it has increased by 45.1% this year, it is still down 90% from its historical high. Even more heartbreaking is that its 24-hour on-chain inflow is only $1,946.
From being the undisputed leading project in the field to becoming a target of public disdain, Merlin Chain took only half a year to make this transition. Even today, there are still occasional mentions of Merlin, but almost all of them are filled with sarcasm and criticism.
Inscription and BTC NFT: From Carnival to Self-Mockery
The Ordinals inscriptions and BRC-20 tokens that once ignited the BTC ecosystem are no longer in the limelight.
Recalling that hot winter of the past when every public chain was launching its own inscription products, the market was plunged into a craze for inscriptions. As the origin of everything in the crypto world, BTC gave birth to popular projects like Sats and Ordi. The slogan "Buy Ordi today, drive an Audi tomorrow" seems to still echo in our ears.
Nowadays, the phrase "Ordinals are dead" has transitioned from mockery to a self-deprecating joke within the community, and even the official accounts of the inscription projects have started using this joke for self-mockery.
The number of active users in the BTC NFT market in the last 24 hours is less than 2,000, accounting for only 1.7% of the overall on-chain activity, which is far lower than that of the ETH or Solana ecosystems.
The actual use of inscriptions and NFTs is still a controversial topic in the market, but once active users have been leaving one after another. The loss of user confidence also indicates that this narrative is gradually being forgotten in people's minds as the fast-paced nature of the cryptocurrency market continues.
Apart from Merlin Chain, BTC inscriptions, and NFTs, other BTCFi projects are gradually revealing their shortcomings or flaws in their models.
Babylon's current TVL has reached a historical high of $6.3 billion, yet the price of the token has fallen 77% from its peak, exposing the shortcomings of its single staking model which lacks innovative applications; similarly, Core, another popular project in the BTC ecosystem, currently has a TVL of only $386 million, down over 70% from the beginning of the year.
However, the truth behind the data is even more severe: apart from Babylon, most BTCFi projects have daily revenue that is less than $50,000, far below the revenue levels of traditional DeFi projects, which often reach several million dollars. The unsustainability of this business model is being ruthlessly exposed by the market.
Narrative Fatigue and Internal Contradiction
The fundamental dilemma of BTCFi stems from the technical limitations of BTC itself.
As "digital gold," BTC is not designed to have the programmability of smart contracts, which means that all BTCFi applications must rely on compromise solutions such as sidechains, L2, or cross-chain bridges.
According to DeFillama data, in current mainstream BTCFi projects, bridged assets account for 80%-100% of TVL: Merlin Chain's bridged TVL accounts for as much as 80%, Core reaches 94%, and Bitlayer is approaching 100% reliance on BTC cross-chain.
This extreme reliance on cross-chain infrastructure not only increases security risks but also goes against the core spirit of decentralization and autonomy of BTC.
On social media, discussions about BTCFi have shifted from early excitement and exploration to a skeptical phase of "prove-your-worth." More and more KOLs are also categorizing the BTC ecosystem as a doomed track.
The attitude of retail investors in the market is self-evident; the expectations for the BTC ecosystem are being repeatedly diluted by the fresh narratives surrounding ETH and SOL. Recently, the continuous selling of BTC by whales to switch to ETH undoubtedly poured a bucket of cold water on this pile of ashes.
Image source @Ai Aunty
On the other hand, the dire situation of the BTC ecosystem also reveals the inherent contradictions in the economic models of most BTCFi projects.
In order to attract liquidity, project teams must provide high-yield incentives, but high yields often rely on token issuance, which can dilute long-term value.
The extremely high turnover rate of BitLayer and the user attrition of the Merlin chain both demonstrate the unsustainability of this mining and selling model.
BTC, the return of the spiritual totem
Looking back at the rise and fall of BTCFi, we may need to reassess BTC's position in the crypto ecosystem.
Unlike ETH, which was designed from the beginning to be a "world computer," BTC is more like a crypto totem, and the role of a totem is to condense consensus and faith, rather than functional expansion.
ETH can support the DeFi ecosystem because it is optimized for programmability at the architectural level. The value proposition of BTC has never been about "what it can do," but rather "what it represents." Perhaps when we try to make BTC support complex financial applications, we are already violating its essence.
Compared to BitLayer and Merlin, Babylon is relatively successful, and its success precisely proves its role as a pure BTC staking protocol. It does not attempt to change BTC but instead utilizes BTC's security to provide services to other chains. This approach of "specialization" may be the correct way for BTC to participate in DeFi.
The decline of BTCFi is not the failure of BTC, as can be seen from BTC's continuous breakthroughs of new highs this year. BTCFi is more like a rational correction by the market to excessive financialization.
BTC is still the most important value storage tool in the crypto world, but it will never be, and should never be, the next ETH.
Recognizing this point may be a sign of the entire industry moving towards maturity.
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BitLayer first day big dump 48%: BTCFi ecosystem trapped in value capture dilemma
Written by: Umbrella
Original title: The Final Chapter of BTCFi: Observing the Ecological Decline from the Plummet of BitLayer
On August 27, the BTC ecological project BitLayer launched on Binance Alpha, but this once highly anticipated BTCFi star project marked the end of an era for the entire track with a sudden plunge.
According to CMC data, BTR opened at 0.1511, but within just a few hours, it plummeted to 0.077, with a daily decline of as much as 48.6%. As of today, August 28, the token is still down 44.3% from its historical high, with a trading volume of 60.3 million USD in the last 24 hours, and a trading volume to market cap ratio as high as 274%. This extreme speculative turnover rate exposes the awkward reality that the project lacks long-term holders.
What is more thought-provoking is that, despite the on-chain TVL remaining at a relatively high level of $429 million, the token price's steep decline clearly reflects the market's skepticism about BTCFi's ability to capture ecosystem value.
The sharp drop at the opening of BitLayer presents more than just a repeated phenomenon of "listing means peak"; it is also a microcosm of the entire BTCFi narrative transitioning from fervor to decline.
The Collective Downfall of Mainstream Projects
The BTC ecosystem has also given birth to many phenomenal popular projects, but they cannot hide the intrinsic flaws and narrative contradictions.
Merlin Chain: 3.8 billion TVL only 50 million left
As a former leader in the BTCFi sector, Merlin Chain's data changes are nothing short of dramatic.
The project attracted up to 3.8 billion USD in BTC staking within 50 days of its launch, with a peak TVL of 530 million USD, becoming the star project with the highest BTC Layer 2 TVL and user count at one point.
However, the reality is extremely harsh: according to DeFillama data, Merlin Chain's current TVL is only $50 million, a drop of over 90% from its peak. Its token Merl is hovering around $0.115, although it has increased by 45.1% this year, it is still down 90% from its historical high. Even more heartbreaking is that its 24-hour on-chain inflow is only $1,946.
From being the undisputed leading project in the field to becoming a target of public disdain, Merlin Chain took only half a year to make this transition. Even today, there are still occasional mentions of Merlin, but almost all of them are filled with sarcasm and criticism.
Inscription and BTC NFT: From Carnival to Self-Mockery
The Ordinals inscriptions and BRC-20 tokens that once ignited the BTC ecosystem are no longer in the limelight.
Recalling that hot winter of the past when every public chain was launching its own inscription products, the market was plunged into a craze for inscriptions. As the origin of everything in the crypto world, BTC gave birth to popular projects like Sats and Ordi. The slogan "Buy Ordi today, drive an Audi tomorrow" seems to still echo in our ears.
Nowadays, the phrase "Ordinals are dead" has transitioned from mockery to a self-deprecating joke within the community, and even the official accounts of the inscription projects have started using this joke for self-mockery.
The number of active users in the BTC NFT market in the last 24 hours is less than 2,000, accounting for only 1.7% of the overall on-chain activity, which is far lower than that of the ETH or Solana ecosystems.
The actual use of inscriptions and NFTs is still a controversial topic in the market, but once active users have been leaving one after another. The loss of user confidence also indicates that this narrative is gradually being forgotten in people's minds as the fast-paced nature of the cryptocurrency market continues.
Apart from Merlin Chain, BTC inscriptions, and NFTs, other BTCFi projects are gradually revealing their shortcomings or flaws in their models.
Babylon's current TVL has reached a historical high of $6.3 billion, yet the price of the token has fallen 77% from its peak, exposing the shortcomings of its single staking model which lacks innovative applications; similarly, Core, another popular project in the BTC ecosystem, currently has a TVL of only $386 million, down over 70% from the beginning of the year.
However, the truth behind the data is even more severe: apart from Babylon, most BTCFi projects have daily revenue that is less than $50,000, far below the revenue levels of traditional DeFi projects, which often reach several million dollars. The unsustainability of this business model is being ruthlessly exposed by the market.
Narrative Fatigue and Internal Contradiction
The fundamental dilemma of BTCFi stems from the technical limitations of BTC itself.
As "digital gold," BTC is not designed to have the programmability of smart contracts, which means that all BTCFi applications must rely on compromise solutions such as sidechains, L2, or cross-chain bridges.
According to DeFillama data, in current mainstream BTCFi projects, bridged assets account for 80%-100% of TVL: Merlin Chain's bridged TVL accounts for as much as 80%, Core reaches 94%, and Bitlayer is approaching 100% reliance on BTC cross-chain.
This extreme reliance on cross-chain infrastructure not only increases security risks but also goes against the core spirit of decentralization and autonomy of BTC.
On social media, discussions about BTCFi have shifted from early excitement and exploration to a skeptical phase of "prove-your-worth." More and more KOLs are also categorizing the BTC ecosystem as a doomed track.
The attitude of retail investors in the market is self-evident; the expectations for the BTC ecosystem are being repeatedly diluted by the fresh narratives surrounding ETH and SOL. Recently, the continuous selling of BTC by whales to switch to ETH undoubtedly poured a bucket of cold water on this pile of ashes.
Image source @Ai Aunty
On the other hand, the dire situation of the BTC ecosystem also reveals the inherent contradictions in the economic models of most BTCFi projects.
In order to attract liquidity, project teams must provide high-yield incentives, but high yields often rely on token issuance, which can dilute long-term value.
The extremely high turnover rate of BitLayer and the user attrition of the Merlin chain both demonstrate the unsustainability of this mining and selling model.
BTC, the return of the spiritual totem
Looking back at the rise and fall of BTCFi, we may need to reassess BTC's position in the crypto ecosystem.
Unlike ETH, which was designed from the beginning to be a "world computer," BTC is more like a crypto totem, and the role of a totem is to condense consensus and faith, rather than functional expansion.
ETH can support the DeFi ecosystem because it is optimized for programmability at the architectural level. The value proposition of BTC has never been about "what it can do," but rather "what it represents." Perhaps when we try to make BTC support complex financial applications, we are already violating its essence.
Compared to BitLayer and Merlin, Babylon is relatively successful, and its success precisely proves its role as a pure BTC staking protocol. It does not attempt to change BTC but instead utilizes BTC's security to provide services to other chains. This approach of "specialization" may be the correct way for BTC to participate in DeFi.
The decline of BTCFi is not the failure of BTC, as can be seen from BTC's continuous breakthroughs of new highs this year. BTCFi is more like a rational correction by the market to excessive financialization.
BTC is still the most important value storage tool in the crypto world, but it will never be, and should never be, the next ETH.
Recognizing this point may be a sign of the entire industry moving towards maturity.