Bloodbath! Over 10 DeFi Projects Queue Up for "Graceful Death" Within Two Months, Under the Liquidity Meat Grinder, Who's Next?

Over the past sixty days, at least ten crypto protocols have announced they are ceasing operations. They are not fleeing with funds but are shutting down due to user loss, depleted funds, or both. Yesterday, the stablecoin protocol Angle also decided to gradually close its EURA and USDA services, despite these two having a total locked value of $250 million.

Angle bluntly stated in its announcement: The competitive landscape for decentralized stablecoins has been completely reshaped. Today, those offering yields on stablecoins are essentially just branding layers on existing lending protocols or vaults, making the maintenance of independent infrastructure unnecessary.

Most of these failed projects once had fully functional products. Polynomial reached a total trading volume of $4 billion across over 70 markets. MilkyWay’s locked value once hit $250 million. Step Finance’s peak monthly active users numbered 300,000. Their technology was not inherently flawed, but the problem was that not enough users were willing to pay for the services to sustain ongoing operations.

MilkyWay’s experience is quite representative. In less than two years, it underwent four strategic shifts: from Celestia liquidity staking, to re-staking, to real-world asset tokenization, and finally even attempting to launch a crypto debit card for rent payments. Each pivot was precisely aligned with current hot topics. Their reflection on re-staking is particularly poignant: they identified the opportunity early, designed the system, saw locked value surge to a high point, and completed audits, yet market enthusiasm for re-staking faded far faster than expected.

Polynomial’s analysis of its failure is even more ruthless, offering a lesson for all perpetual contract projects. They admit that in the derivatives space, technological advantages are meaningless. Even if they improve execution speed, optimize user experience, and build innovative architectures, traders will flock to places with abundant liquidity. All other features are just embellishments.

The conclusion is harsh but clear: liquidity is the only moat in the derivatives field. You cannot beat liquidity through innovation, marketing, or development skills.

The closure of ZeroLend serves as a warning to applications attempting to launch across multiple blockchains. They had bet on emerging chains like Manta, Zircuit, and Xlayer, but when the market turned bearish, liquidity on these chains dried up quickly, and oracle services also ceased. Long-term unprofitable operations ultimately became unsustainable.

Even giants like Aave recently shut down services on several blockchains through community votes, citing operational losses. The once-legendary on-chain analytics tool Parsec also admitted that after the FTX collapse, spot trading, lending, and leverage activities in DeFi have never returned to their former levels. Market logic has changed, but they failed to truly understand it.

The market shows its brutal side. Slingshot was completely shut down after being acquired. Eden cut 80% of its unprofitable product lines, retaining only core services—classic 80/20 rule in business. Step Finance’s fate was sealed by a fatal blow: on January 31, it suffered a $26 million hack, directly leading to its end.

What do these projects have in common? They failed to adapt to the rapidly changing market environment and lacked sufficient funds for the next pivot. Each team bet that their ecosystem would experience explosive growth, but the results either fell short of expectations or didn’t materialize at all.

For example, the DeFi ecosystem around Celestia has never truly taken off. On-chain derivatives protocols struggle to compete with players like Hyperliquid, and even established platforms like dYdX and GMX are struggling. Expanding into new chains and narrative fields is extremely costly.

For users, transferring funds from one platform to another is easy and inexpensive. But for applications, preparing for potential new user bases requires huge investments of time and capital.

The only somewhat comforting point is that all these failures are “respectable deaths.” All projects have given users time to withdraw funds, teams did not run away, nor did they issue tokens for a final harvest. Compared to projects that simply vanished with funds in 2022, the industry seems to be learning how to exit responsibly.

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