DeFi TVL Analysis: The siphoning effect of leading DEXs intensifies, and LST leverage retreats

As of May 22, 2026, the global DeFi market exhibits a pronounced structural divergence. Total Value Locked (TVL) continues to concentrate in a few leading protocols, with PancakeSwap and Raydium respectively dominating the DEX liquidity landscape on BNB Chain and Solana ecosystems. Meanwhile, the sector of liquid staking derivatives (LST) faces a comprehensive retreat, with funds accelerating out of leveraged yield strategies. Multiple signals collectively point to a solidifying market pattern—parallel siphoning effects from top DEXs and a decline in LST leverage, with liquidity stratification profoundly reshaping the competitive order of DeFi.

Why Is Capital Continually Focusing on Leading DEXs

Capital allocation in DeFi is undergoing a significant trend toward centralization at the top. Data shows that the top 14 protocols account for over 75% of the entire network’s TVL, further deepening the monopoly pattern. In the DEX sector, this centralization is especially prominent. PancakeSwap recorded 7.4 million unique users in Q2 2025, with a TVL of approximately $2.47 billion, of which about $2.18 billion is deposited on BNB Chain. Raydium holds an overwhelming advantage in the Solana ecosystem, with its DEX trading volume accounting for over 50%, surpassing the combined volume of the next four DEXs, and token buyback amounts reaching $186 million. The continuous influx of funds into top DEXs is fundamentally a comprehensive trade-off by liquidity providers regarding trading depth, user base, and fee returns. In the absence of significant differentiation advantages, the liquidity attraction capacity of small and medium DEXs is being systematically weakened.

How Is the DEX Trading Volume Map Being Rewritten

The market share of decentralized exchanges is experiencing unprecedented restructuring. Leveraging low latency and high throughput advantages, Solana’s DEX trading volume surpassed Ethereum and BNB Chain in 2025, reaching a total of $1.21 trillion for the year. Raydium, as the largest DEX on Solana, dominates the ecosystem with a 49.2% market share, with cumulative trading volume of $325 billion in Q1. PancakeSwap set a record in June 2025 with a monthly trading volume of $325 billion, nearly double the May figure. These two leading DEXs have each established formidable liquidity barriers within their respective ecosystems. Meanwhile, Ethereum’s Uniswap, despite maintaining a cross-chain TVL of about $4.5 billion, faces bidirectional squeeze from BNB Chain and Solana systems, eroding its market share.

Why Is the Liquid Staking Sector Experiencing a Full Retreat

Contrasting with the capital centralization in the DEX sector, the LST sector is undergoing a systemic correction. Previously driven by leveraged yield expectations, large inflows into liquid staking protocols have begun to accelerate exit as market risk appetite shrinks. Throughout 2025, the staking sector’s TVL fell from a peak of $92.1 billion to $55.2 billion, marking the end of a phase of high APY-driven prosperity. The core logic of this adjustment is that when staking yields return to the baseline costs of network consensus security, the previously amplified yield premiums via leverage tools and re-staking protocols begin to disintegrate. Lending protocols are also under pressure. While Aave remains dominant in the lending market, total on-chain lending activity has declined, with asset collateralization ratios and capital utilization rates of top lending protocols facing marginal downward pressure. Every link in the LST leverage chain—from staking to lending to re-staking—has entered a deleveraging cycle.

Where Is the Capital Coming From and Going To

Funds flowing out of the LST sector are not leaving DeFi entirely but are undergoing structural reallocation. The capital migration pathways within Ethereum’s Layer 2 ecosystems provide a clear observation window. Base and Arbitrum together control about 77% of L2 TVL, with Base, leveraging Coinbase’s fiat onramps and social finance applications, capturing roughly 46% of the L2 market share. However, capital is not flowing in only one direction. During the week ending May 6, 2026, Arbitrum experienced approximately $131.59 million in net outflows via cross-chain bridges, while the Ethereum mainnet also saw about $21.97 million in net outflows. The outflowing funds are not disappearing but migrating to new high-performance chains like Plasma and MegaETH. Plasma rapidly builds lending ecosystems through white-labeled Aave frameworks, while MegaETH, with 10-millisecond block confirmation and over 100k TPS, attracts deployment in high-frequency DeFi scenarios. These new chains are absorbing liquidity spilled from mature L2s and are becoming the frontier for DeFi growth in the next phase.

Where Will Market Structural Divergence Lead

Currently, DeFi exhibits a mismatch pattern of “strong top DEXs and weak staking and lending.” This divergence is not a short-term emotional fluctuation but a long-term trend shaped by multiple structural forces. On one hand, PancakeSwap and Raydium are continuously strengthening their liquidity barriers through tokenomics optimization (deflationary mechanisms and fee buybacks) and ecosystem deepening. On the other hand, the yield expectations in the LST sector are being downgraded, forcing capital to seek higher risk-adjusted returns elsewhere. Lending protocols are devolving from growth engines to infrastructure layers, with growth logic focused solely on TVL, giving way to more refined assessments of capital efficiency and protocol revenue. The key variables to watch in the next quarter are whether top DEXs’ fee levels will rise as competition stabilizes and whether the LST sector can rekindle capital inflows through new product innovations (such as differentiated verification services, cross-chain staking, etc.).

How to Assess Risks and Opportunities Amid the Divergence

In an environment where TVL centralization and LST retreat occur simultaneously, participants need to reassess the underlying valuation framework of DeFi. From a risk perspective, the high concentration of top DEXs itself introduces systemic vulnerabilities—Raydium’s over 50% market share in Solana DEXs means trading volume on that chain heavily depends on the proper functioning of a single protocol; similarly, PancakeSwap’s dominance in BNB Chain’s DEX market ties the overall trading activity of the BNB Chain ecosystem closely to its performance. From an opportunity perspective, the retreat of the LST sector leaves behind more reasonably valued entry points. In 2025, top protocols doubled their annual revenue to $5.02 billion, with a divergence between revenue growth and TVL contraction, indicating a shift in DeFi from “scale competition” to “profitability quality competition.” Projects with diversified revenue streams and sustainable tokenomics are more likely to stand out amid the divergence.

Underlying Logic: How Liquidity Stratification and Leverage Retreat Are Reshaping DeFi Order

Placing these phenomena within the broader macro context of DeFi evolution reveals two clear underlying logics: liquidity stratification and leverage retreat. Liquidity stratification manifests as TVL shifting from broad distribution to concentration among top protocols—this is not passive loss but an active choice by liquidity providers amid decreasing information asymmetry and more transparent trading costs. PancakeSwap and Raydium, with deeper order books, lower slippage, and higher capital efficiency, have become the ultimate destinations for optimal liquidity allocation. Leverage retreat is reflected in the declining funds in the LST sector and lending protocols, indicating a market rationalization of excess yield expectations. DeFi is transitioning from a “yield-driven capital game” to a “efficiency-driven financial infrastructure.” Although this transformation involves pain, it also lays the foundation for more sustainable growth models.

Summary

As of May 22, 2026, the DeFi market displays a clear pattern of structural divergence. TVL continues to concentrate in top DEXs like PancakeSwap and Raydium, which have established significant liquidity barriers within BNB Chain and Solana ecosystems. Meanwhile, the LST sector is experiencing a full retreat, with TVL from the staking track significantly shrinking, as the yield-driven logic gives way to considerations of protocol fundamentals and capital efficiency. Funds are migrating from mature L2s like Ethereum mainnet and Arbitrum to new high-performance chains such as Plasma and MegaETH, further intensifying the multi-polarization trend. Under the combined forces of liquidity stratification and leverage retreat, DeFi is shifting from scale competition to quality competition—top protocols demonstrate profitability through revenue growth, while small and medium protocols face severe retention challenges. The key to the future market lies in whether the siphoning effect of top DEXs can translate into sustainable protocol revenues and whether the LST sector can rekindle user interest through product innovation.

FAQ

Q: Is the TVL concentration in DeFi continuing to deepen?

Yes. As of May 2026, the top 14 protocols hold over 75% of the total network TVL, with PancakeSwap and Raydium being the undisputed leaders in BNB Chain and Solana DEX sectors.

Q: What are the main reasons for the retreat of the LST sector?

The retreat is mainly driven by two factors: first, staking yields returning to the baseline costs of network consensus security, causing the yield premiums amplified by leverage and re-staking protocols to diminish; second, market risk appetite shrinking, leading to active capital withdrawal from high-leverage strategies.

Q: Where is the outflow of funds from the LST sector going?

Funds are undergoing structural reallocation, with some flowing into more liquid top DEXs, and others migrating to new high-performance chains like Plasma and MegaETH, which are rapidly building lending ecosystems through technological differentiation and lending protocols to attract capital.

Q: What are the core competitive advantages of PancakeSwap and Raydium?

PancakeSwap leverages BNB Chain’s low fees and fast block times, recording 7.4 million unique users in Q2 2025; Raydium, with a 49.2% market share in Solana DEXs and token buyback mechanisms, has established liquidity barriers. Both optimize user engagement through tokenomics and ecosystem integration.

Q: What risk indicators should be monitored in the current market environment?

Key indicators include the fee trend of top DEXs, the convergence speed of yields in the LST sector, the sustainability of TVL on new chains (watching for fund withdrawals after incentive programs end), and changes in lending protocol utilization rates and liquidation thresholds.