February 2025 Public Chain Market Analysis: Challenges and Innovations in Adjustment

In February 2025, the blockchain market experienced a significant adjustment period, presenting challenges for both mature networks and emerging public chains. Bitcoin demonstrated robustness, further solidifying its market dominance, while most chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activities in the public chain space did not cease: the Berachain mainnet went live, Base infrastructure was upgraded, and Uniswap launched Layer 2, marking the highlights of the month.

Market Overview

The market saw a significant correction in February: Bitcoin fell from $98,768 to $84,177, a drop of 14.8%, while Ethereum experienced an even larger decline, dropping from $3,065 to $2,216, a decrease of 27.7%. In the last week of the month, panic stemming from security concerns spread, further intensifying the selling pressure.

This pullback comes right after the bullish market in January, but market signals are complex, with investors wavering between optimism and concerns caused by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has decreased, especially in more speculative areas. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market feels the impact of hacker attacks more acutely.

Regulatory and Policy Changes

The U.S. government's cryptocurrency executive order focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, a hacking incident on February 21 resulted in losses of $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and causing market sentiment to shift rapidly. Meanwhile, the SEC's stance has softened, pausing investigations into several major trading platforms and dropping its appeal against the "dealer rule." The bipartisan GENIUS Act (the U.S. Stablecoin National Innovation and Establishment Act) further strengthens the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turmoil. The speculative frenzy driven by tokens related to the Argentine president has quickly cooled due to negative news, leading to a plummet in valuation and a significant shrinkage in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1

Layer 1 public chains are generally under pressure, with a total market capitalization decline of 20.8% to $2.3 trillion. Bitcoin's dominance rose from 71.3% to 74.2%, while Ethereum's share shrank from 14.0% to 11.9%. BNB Chain's share slightly increased to 3.7%, but Solana's share fell from 4.0% to 3.3% after a price drop of 36.3%.

Litecoin rises against the trend, up 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others lag behind.

DeFi TVL decreased by 20.0% to $82.9 billion, with Ethereum at $44.9 billion (down 21.7%) and Solana at $8.6 billion (down 34.1%).

Berachain has emerged as a dark horse, quickly rising to sixth place with a TVL of $3.2 billion after the mainnet launch on February 6. The chain issued 80 million BERA tokens and adopts a "proof of liquidity" model - an innovative staking method that converts liquidity into network security. Following a $100 million funding round in 2024, this month's airdrop and governance rights have sparked market enthusiasm. Unlike traditional proof of stake, this approach may redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculative frenzy surrounding Solana has clearly cooled down. High-profile failures, such as tokens related to the President of Argentina, have undermined market confidence, leading to a significant drop in trading volume on certain DEX platforms. Although these types of tokens are not going to disappear and can be viewed as digital collectible cards, their peak frenzy may have already passed, and traders are starting to pay more attention to fundamentals rather than speculation.

Bitcoin Layer 2 and Sidechains

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

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

The downturn in this sector aligns with the views of an industry leader at Consensus 2025: "As initial enthusiasm wanes, more than two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." He predicts that the market will face severe challenges, and the industry slump in February suggests 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 Layer 2 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 another major 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 maintain user retention. Unichain's mainnet launched on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a game changer for scalability performance, with some heavyweight institutions joining. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

At the same time, although Sonic EVM is not an Ethereum Layer 2, its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana attracted a lot of attention, achieving 10,000 TPS and bringing in $47.6 million in funding for a certain DeFi protocol within a few days. These initiatives indicate that Layer 2 projects are increasingly investing in technology rather than just hype.

The founder of Ethereum made a comment on February 19, emphasizing the need for Ethereum to clarify its positioning amid increasing competition. He advocated for Layer 2 to take a leadership role in scalability (such as a 17x transaction improvement) and interoperability, pointing out that they have evolved from "advanced multi-signatures" into powerful networks. Although he did not directly comment on Sonic EVM, its EVM compatibility and speed resonate with his vision of a seamless connection within the "Ethereum universe." However, he also expressed dissatisfaction with the casino-like tendencies in the ecosystem, calling for a focus on real value rather than speculative bubbles.

Financing Situation

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