Babylon’s TVL Plunges: $1.2B Bitcoin Unstaking Shakes DeFi

The Bitcoin staking protocol, Babylon, experienced a significant downturn as approximately $1.26 billion in Bitcoin was unstaked, causing its Total Value Locked (TVL) to plummet by 32%. This substantial unstaking event, highlighted by blockchain analytics firm Lookonchain, involved four distinct addresses withdrawing a combined 14,929 BTC.

One address alone accounted for the lion’s share of the unstaked assets, amounting to roughly $1.1 billion. With Bitcoin prices fluctuating around $84,400 at the time, the total value of the unstaked BTC reached approximately $1.26 billion. This event led to a dramatic decrease in Babylon’s TVL, dropping from $3.97 billion to $2.68 billion according to DefiLlama, a prominent data tracker.

Unstaking Mystery and Potential Restakes

Speculation surrounding the identities behind the unstaking addresses is rife within the community. While some suspect involvement from the Chinese government, others believe the activity may be attributed to portfolio rebalancing, risk aversion, or simple market maneuvering by a large trader. The unstaking activity could potentially be connected to the transition by Lombard Finance, a DeFi protocol. Lombard announced its unstaking of Bitcoin as part of a shift to new finality providers, timing the move to coincide with the end of Babylon’s Phase 1 cap on April 24th, ensuring user reward access.

Lombard Finance confirmed their intention to restake the funds upon completion of the unbonding process. While Cointelegraph attempted to seek clarification from Babylon Labs, a response was not received before publication.

Airdrop Aftermath and Babylon’s Future

This substantial unstaking follows a previous event tied to Babylon’s airdrop for early adopters. The $21 million BTC unstaking that occurred after the airdrop, according to Bitlayer co-founder Kevin He, reflects common short-term market behavior. Despite this recent volatility, Babylon remains a key player in the Bitcoin DeFi sector, boasting a peak TVL exceeding $6 billion in December. Its focus on enabling secure, trustless Bitcoin staking continues to be a key part of its mission.