Institutional Capital Pushes DeFi to All-Time High as Retail Engagement Declines
The decentralized finance (DeFi) sector reached a new milestone in the third quarter of 2025, with total value locked (TVL) surging to a record $237 billion, even as user activity fell sharply, according to the latest DappRadar report.
The report revealed that daily unique active wallets (UAWs) averaged 18.7 million in Q3, marking a 22.4% decline compared to the previous quarter. The data highlights a growing divide between institutional liquidity inflows and retail user participation in decentralized applications (DApps).
âEvery major DApp category recorded a drop in active wallets, but the SocialFi and AI sectors saw the steepest declines,â the report stated. AI-focused DApps lost over 1.7 million daily users, falling from 4.8 million in Q2 to 3.1 million in Q3, while SocialFi wallets plunged from 3.8 million to 1.5 million during the same period.
DeFi Liquidity Surges Amid Institutional Momentum
Despite the contraction in user activity, DeFi liquidity hit historic levels, driven by institutional exposure to Bitcoin and stablecoins, along with regulatory clarity under the U.S. GENIUS Act and the rise of real-world asset (RWA) tokenization.
Stablecoins played a pivotal role in this growth. Stablecoin inflows reached $46 billion in Q3, led by Tether (USDT) and Circleâs USDC, strengthening their position as bridges between crypto and traditional finance.
âStablecoins are becoming the backbone of institutional DeFi participation,â analysts noted. âTheir integration with RWAs and emerging blockchain infrastructure has accelerated DeFiâs maturity.â
A notable addition to the ecosystem was Plasma, a new layer-1 chain built exclusively for stablecoins, which debuted with over $8 billion in TVL in its first month of launch.
BNB Chain Gains While Ethereum Retains Lead
Ethereum maintained its position as the top DeFi network with $119 billion locked, representing over 50% of the total DeFi market share, despite a 4% quarter-over-quarter decline. Solana followed with $13.8 billion, down 33% from Q2, reflecting weaker ecosystem activity.
Meanwhile, BNB Chain posted a 15% increase in TVL, attributed to the launch of Aster, a perpetual decentralized exchange (DEX) that saw rapid growth in trading volume during September.
âBNB Chainâs steady expansion highlights growing confidence in alternative DeFi ecosystems,â DappRadarâs analysis stated.
However, the data wasnât without controversy. DefiLlama questioned the accuracy of Asterâs reported volumes, citing similarities to Binance perpetual futures data, and later removed Aster from its listings.
The third quarterâs results underline a critical shift: DeFi capital is growing faster than user participation. Institutional players are fueling record liquidity, while retail engagement â especially in SocialFi and AI DApps â continues to cool.
As Q4 begins, analysts say the DeFi market faces a defining test â whether user adoption can rebound to match institutional momentum, or if the industry will continue evolving as a capital-driven ecosystem led by large investors.
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