The decentralised finance (DeFi) sector has experienced a significant contraction, with the Total Value Locked (TVL) plummeting by $45 billion from its peak of $138 billion on 17 December 2024 to $92.6 billion as of 10 March 2025. This sharp decline has effectively erased all gains made since the election of President Donald Trump in November 2024, raising concerns about the future of DeFi and the broader cryptocurrency market.
Ethereum, which constitutes a substantial portion of the DeFi ecosystem, has been particularly affected. Data from DefiLlama indicates that Ethereum’s TVL has decreased by $30.6 billion from its cycle highs. Despite positive industry developments, such as the introduction of Bitcoin spot exchange-traded funds (ETFs) in the United States and an executive order by President Trump to establish a Bitcoin reserve, Ether (ETH) has struggled to surpass its all-time high of $4,787 set in November 2021. This persistent underperformance underscores ongoing challenges within the Ethereum network and the DeFi space.
The Ethereum network has been undergoing critical upgrades, including the rollup-centric roadmap aimed at reducing gas fees and alleviating network congestion. However, challenges such as liquidity fragmentation remain a significant concern, potentially hindering the network’s long-term scalability. The upcoming Pectra upgrade seeks to enhance both layer-2 performance and inter-network connections, aiming to lower transaction fees and unify liquidity pools. Nevertheless, the March 2025 testnet launch encountered technical difficulties, creating uncertainty regarding the successful implementation of these critical improvements.
This downturn in DeFi TVL has raised questions about the sustainability of decentralised financial assets and the future of Ethereum’s dominance in the sector. The rapid decline following the December 2024 peak suggests that investor confidence in DeFi platforms may be waning, aligning with broader market trends and regulatory uncertainties. Analysts are now reassessing the long-term viability of DeFi, considering the recent market corrections, ongoing liquidity challenges, and the technological hurdles faced by major platforms such as Ethereum.
As the DeFi landscape continues to evolve, market participants will closely monitor Ethereum’s upcoming upgrades and regulatory developments. The ability of the DeFi sector to recover and sustain growth will depend on addressing scalability issues, improving liquidity, and restoring investor confidence in decentralised finance solutions.
