DeFi is Not Dead, Just Bleeding: Capital Flows to the Big Players During the Bear Market

The DeFi market is entering a phase of intense cleansing. While the 2021 period saw a boom of numerous farm protocols, incentives, and complex yield strategies, by 2025–2026, the DeFi landscape has changed significantly: capital is no longer dispersed but concentrated heavily in a few leading projects.

Comparing the leading TVL projects between 2021 and 2025 reveals a very clear point: capital flows only to places that are sufficiently safe, liquid, and efficient. The most prominent remains AAVE – the “king” of lending. AAVE’s TVL increased from about $26 billion to over $55 billion, demonstrating that borrowing and lending in a decentralized manner have never lost their core role in the crypto ecosystem. Lending continues to be the backbone of DeFi. Conversely, models heavily reliant on incentives and complex farm strategies like CRV, CVX, CAKE have seen capital flow out. As the market enters a tightening phase, investors are no longer interested in fake yields but prioritize sustainability and real liquidity. These tokens should only be approached with extreme caution during a bear market. A completely new trend is taking over DeFi: Liquid Staking and Restaking. Projects like LDO, EIGEN, ETHFI, BABY are becoming the centers of new capital flows. Re-staking, synthetic assets, and next-generation decentralized stablecoins are holding tens of billions of USD in TVL. The market no longer chases hundreds of small protocols but focuses on a few “super apps” with deep ecosystems, thick liquidity, and real scalability. DeFi is not in decline. The game has just changed. Currently, DeFi operates very much like a trading exchange: strong hands win everything. Leading projects are becoming more powerful, while most small DeFi projects are almost out of the game. Liquidity dries up, users leave, and TVL quickly evaporates when the market downturns. In a bear market, a sensible strategy is no longer “buy the dip en masse,” but rather to choose carefully. Only protocols that truly hold capital, infrastructure, and genuine users have the chance to survive and break out when the growth cycle returns. DeFi is still there. But it’s only for the strong.