February 2025 Blockchain Market Review: Challenges and Innovations in Adjustment

In February 2025, the blockchain market experienced a significant adjustment, posing challenges to various public chains. Bitcoin demonstrated resilience, further consolidating its dominant position in the market, while most chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nonetheless, development activity in the public chain sector remained vibrant, with the mainnet launch of Berachain, infrastructure upgrades for Base, and the Layer 2 launch of Uniswap being the highlights of the month.

Market Overview

The market showed a significant correction in February: Bitcoin dropped from $98,768 to $84,177, a decrease of 14.8%; Ethereum saw an even larger decline, falling from $3,065 to $2,216, a drop of 27.7%. In the last week of the month, the selling pressure intensified due to security incidents.

This pullback closely follows the bull market in January, but market signals are complex, and investors are wavering between optimism and concerns raised by safety hazards. Market sentiment has worsened, and risk appetite has declined, especially in more speculative areas. Globally, the North American market shows cautious optimism due to policy trends, while the Asia-Pacific market feels the impact of safety incidents more acutely.

Changes in the Policy Environment

The executive order on cryptocurrency issued by the U.S. government focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, a security incident at a certain trading platform on February 21 resulted in losses of up to $1.5 billion, setting a record for the largest loss in cryptocurrency history, which raised new security concerns and led to a rapid shift in market sentiment. Meanwhile, the attitude of regulators has softened, pausing investigations into several well-known companies and dropping appeals against the "dealer rules." The bipartisan supported "GENIUS Act" further improves the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turmoil. The frenzy driven by tokens related to a certain country's president quickly cooled due to negative associated news, resulting in a drastic drop in valuation and a significant shrinkage in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1 Public Chain Performance

Layer 1 public chains are generally under pressure, with the total market capitalization declining by 20.8% to $2.3 trillion. Bitcoin's dominance has risen from 71.3% to 74.2%, while Ethereum's share has shrunk from 14.0% to 11.9%. The share of a certain chain has slightly increased to 3.7%, but Solana's share has decreased from 4.0% to 3.3% after a price drop of 36.3%.

Litecoin has risen against the trend, increasing by 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others have underperformed.

The total locked value in DeFi is ( TVL ) decreased by 20.0% to 82.9 billion USD, with Ethereum at 44.9 billion USD (down 21.7%) and Solana at 8.6 billion USD (down 34.1%).

Berachain has emerged rapidly, jumping to sixth place with a TVL of $3.2 billion after launching its mainnet on February 6. The chain issued 80 million BERA tokens and adopted a "liquidity proof" model - an innovative staking method that converts liquidity into network security. Following a massive financing round in 2024, this month's airdrop and governance incentives have excited the market. This approach may redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculative token frenzy of Solana has clearly cooled down. High-profile failure cases have damaged market confidence, leading to a significant decline in trading volumes across multiple platforms. While such tokens are unlikely to disappear and can be viewed as digital collectibles, their peak frenzy may have passed, and traders are beginning to focus more on fundamentals rather than speculation.

Bitcoin Layer 2 and Sidechains

The TVL of Bitcoin L2 and sidechains has decreased by 24.5% from $2.7 billion to $2.1 billion. Core leads with a TVL of $460 million (down 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed well, with only a 7.9% decline to $220 million.

Among medium-sized platforms, Merlin performed relatively well, with TVL decreasing slightly by 9.3% to $150 million. Small platforms faced greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

A well-known project founder predicted at Consensus 2025: "As the initial enthusiasm wanes, more than two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." He forecasts that the market will face severe challenges, and the industry slump in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may prove to be more durable than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL fell by 23.4% to $14 billion. A certain platform maintains its leading position with a TVL of $4.5 billion (down 33.4%), while Base climbed to second place with a TVL of $4.2 billion (down 10.6%), pushing the certain platform ($2.1 billion) to third. Polygon zkEVM surged by 104.1% to $30 million, becoming a rare highlight this month.

Base launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aiming to enhance user experience. Unichain's mainnet launched on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a breakthrough in scalability performance, with several heavyweight institutions having joined. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the potential of modular design.

At the same time, Sonic EVM, although not an Ethereum Layer 2, attracted significant attention with its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana, achieving 10,000 TPS and bringing in $47.6 million in funding for a DeFi project within a few days. These initiatives indicate that Layer 2 projects are increasing their technological investment rather than merely relying on marketing gimmicks.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its positioning in the increasingly fierce competition. He advocates for Layer 2 to take a leading role in scalability (such as a 17-fold increase in transactions) and interoperability, noting that they have evolved from "advanced multi-signatures" into a powerful network. He also expressed dissatisfaction with the speculative tendencies in the ecosystem, calling for a focus on real value rather than short-term hype.

Financing Situation

Financing activities have slowed down, with a total of 6 transactions completed in February, amounting to $32.4 million. Mango Network raised $13.5 million for its EVM-MoveVM hybrid chain, planning to launch in the first quarter of 2025. Fluent Labs secured $8 million in funding to develop a multi-virtual machine Layer 2 that connects Ethereum and Solana.