On August 27th, the BTC ecosystem project BitLayer was listed on Binance Alpha. This once highly anticipated star project of BTCFi, however, used a sharp plunge to write the footnote for the entire track.
According to CMC data, BTR opened at $0.1511 and plunged to $0.077 within just a few hours, a single-day drop of 48.6%. As of today,
August 28th, the token is still down 44.3% from its all-time high. The 24-hour trading volume was $60.3 million, with a volume-to-market cap ratio as high as 274%. This extremely speculative turnover rate exposes the embarrassing reality of the project's lack of long-term holders.
More thought-provoking is that although the on-chain TVL remains at a relatively high level of $429 million, the cliff-like drop in the token price clearly reflects market doubts about the value capture capability of the BTCFi ecosystem.
BitLayer's opening plunge represents far more than just another case of "listing at the peak"; it is a microcosm of the entire BTCFi narrative moving from frenzy to decline.
The Collective Downfall of Mainstream Projects
The BTC ecosystem has also given birth to several phenomenal hot projects, but they cannot conceal their fundamental flaws and narrative contradictions.
Merlin Chain: $3.8B TVL Reduced to Just $50M
As the former leading project in BTCFi, the data changes of Merlin Chain are nothing short of breathtaking.
Within 50 days of launch, the project attracted as much as $3.8 billion in BTC staking, with a peak TVL reaching $530 million, once becoming the star project ranked first in both TVL and user count among BTC Layer2s.
However, reality is brutally 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 hovers around $0.115. Although it has gained 45.1% year-to-date, it is still down 90% from its all-time high. Even more disheartening is its 24-hour on-chain inflow of only $1,946.
From the undisputed leading project in the track to being universally denounced like a rat running across the street, it took Merlin Chain only half a year. Even today, people still occasionally mention Merlin, but almost entirely with sarcasm and criticism.
Inscriptions and BTC NFTs: From Carnival to Self-Mockery
Ordinals inscriptions and BRC-20 tokens, which once ignited the BTC ecosystem, have also lost their former glory.
Recalling that winter when inscriptions were hot, every public chain was launching its own inscription products, plunging the market into a frenzy of全民打銘文 (everyone minting 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" still seems to echo in our ears.
Now, the phrase "Ordinals are dead" has turned from mockery into an inside joke for self-deprecation, with even the official accounts of inscription projects starting to use this meme to poke fun at themselves.
The BTC NFT market has fewer than 2,000 active users in 24 hours, accounting for only 1.7% of the chain's total activity, far lower than the ETH or Solana ecosystems.
The practical utility of inscriptions and NFTs remains a highly controversial topic in the market, but the once-active users are leaving one after another. The loss of user confidence also预示着 (signals) that the status of this narrative in people's minds is gradually fading away with the fast pace of the crypto market.
Beyond Merlin Chain, BTC inscriptions, and NFTs, other BTCFi projects are gradually exposing their own shortcomings or model flaws.
Babylon's current TVL has hit a new all-time high of $6.3 billion, yet its token price is down 77% from its peak, exposing the短板 (shortcoming) of its single staking model lacking innovative applications; Core, another popular project in the BTC ecosystem, has a current TVL of only $386 million, down over 70% since the beginning of the year.
The truth behind the data is even more severe: except for Babylon, most BTCFi projects have daily fee revenues of even less than $50,000, far below the millions of dollars often seen in traditional DeFi projects. The unsustainability of this business model is being mercilessly laid bare by the market.
Narrative Fatigue and Internal Contradictions
The fundamental dilemma of BTCFi stems from BTC's own technical limitations.
As "digital gold," BTC was not designed with the programmability of smart contracts, which means all BTCFi applications must rely on compromise solutions such as sidechains, L2s, or cross-chain bridges.
According to DeFillama data, among current mainstream BTCFi projects, bridged assets account for 80%-100% of TVL: Merlin Chain's bridged TVL占比 (ratio) is as high as 80%, Core's is 94%, and Bitlayer relies nearly 100% on BTC cross-chain.
This extreme reliance on cross-chain infrastructure not only increases security risks but also violates the core spirit of BTC's decentralization and self-sovereignty.
On social media, discussions about BTCFi have shifted from the early excitement and exploration to a "prove-your-worth" phase of skepticism. More and more KOLs are also listing the BTC ecosystem as a track destined for failure.
The attitude of retail investors is self-evident; expectations for the BTC ecosystem are being diluted again and again by fresh narratives on ETH and SOL. The recent continuous selling of BTC by whales to switch to ETH is undoubtedly pouring cold water on these ashes.
On the other hand, the dismal state of the BTC ecosystem also reveals the internal contradictions in the economic models of most BTCFi projects.
To attract liquidity, project teams must offer high-yield incentives, but high yields often rely on token issuance, which dilutes long-term value.
BitLayer's ultra-high turnover rate and Merlin Chain's user loss both prove the unsustainability of this "mine-and-dump" model.
BTC: Returning to the Spiritual Totem
Looking back at the rise and fall of BTCFi, we perhaps need to re-examine BTC's positioning in the crypto ecosystem.
Unlike ETH, which was designed from the start as a "world computer," BTC is more like a crypto totem. The role of a totem is to凝结共识与信仰 (condense consensus and belief), not functional expansion.
ETH can support the DeFi ecosystem because its architecture is optimized for programmability. BTC's value proposition 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 going against its essence.
Compared to BitLayer and Merlin, Babylon is relatively successful. Its success恰恰证明了 (precisely proves that) as a pure BTC staking protocol, it does not try to change BTC but uses BTC's security to provide services for other chains. This approach of "术业有专攻" (specialization in a specific field) might be the correct way for BTC to participate in DeFi.
The decline of BTCFi is not the failure of BTC, as is evident from BTC's continuous breaking of new highs this year. BTCFi is more like the market's rational correction of excessive financialization.
BTC remains the most important store of value in the crypto world, but it will never, and should never, become the next ETH.
Recognizing this might be the sign of the entire industry maturing.
