A significant liquidity crisis is impacting the Decentralized Finance (DeFi) sector, with an estimated $12 billion in capital now sitting idle. This situation, characterized by 95% of capital being unused, has emerged following substantial market structural changes that occurred after October 2025. The crisis is particularly affecting the liquidity of major cryptocurrencies such as Ether (ETH) and Bitcoin (BTC).
This ongoing crisis underscores the inherent fragility within DeFi systems. It has led to a notable drop in liquidity for prominent cryptocurrencies, which in turn is impacting institutional flows and prompting strategic adjustments across various decentralized finance platforms.
The current DeFi liquidity crisis has resulted in $12 billion of capital being unused, representing 95% of available funds. Several structural changes that took place post-October 2025 have significantly contributed to this predicament, with notable impacts observed on major digital assets including ETH and BTC.
Key players within the DeFi ecosystem, such as Aave and Sky (formerly MakerDAO), are prominently involved in the current landscape. Aave's leadership has witnessed a record surge in ETH deposits, while Sky's strategic shift signifies a considerable evolution in its governance model.
BTC and ETH Experience Significant Liquidity Declines
Both Bitcoin (BTC) and Ether (ETH) have experienced substantial declines in liquidity, with their respective order book depths contracting significantly in the aftermath of recent market events. These developments have rippled across altcoins and the derivatives markets, driven by the flows originating from these market disruptions.
BTC and ETH have seen significant liquidity declines, with orderbook depths contracting post-crash. These developments have triggered effects across altcoins and the derivatives markets due to the flows emanating from market disruptions.
Analysts have pointed to a near $1 billion withdrawal from BTC Exchange-Traded Funds (ETFs), which is attributed to a risk-off stance adopted by U.S. institutions. Current on-chain data, however, indicates robust inflows into ETH, highlighting the continued adoption of delta-neutral DeFi strategies despite the prevailing market downturn.
Shifting Liquidity Patterns Post-October 2025 Crash
Previous liquidity events, including the notable crash in October 2025, led to persistent shifts in liquidity away from centralized exchanges towards decentralized platforms. In earlier bear phases, capital typically exited the market towards centralized exchanges, a pattern that exposed past structural vulnerabilities.
Experts emphasize that current strategies are centered on robust capital management. The observed increase in Decentralized Exchange (DEX) activity and the adoption of delta-neutral strategies represent a departure from historical practices of over-leveraging, which previously resulted in severe liquidity challenges during similar market conditions.
Analysis of liquidity patterns post-October 2025 crash indicates a significant shift. Past events caused liquidity to move from centralized to decentralized exchanges. Previous bear phases saw capital exits primarily towards CEXes, emphasizing past structural vulnerabilities.