Babylon experiences massive BTC withdrawal, causing a 32% drop in TVL
The Bitcoin staking protocol Babylon has just witnessed one of the largest fund withdrawals in its history: 14,929 BTC, equivalent to approximately $1.26 billion, has been taken out of the platform. This operation has led to a dramatic 32% decrease in the total value locked (TVL), falling from $3.97 billion to $2.68 billion, according to DefiLlama data.
Data from Lookonchain reveals that four major addresses are responsible for this wave of disengagement. One of these addresses alone held 13,129 BTC, valued at over $1.1 billion at the current price. While the exact origin of these movements remains unknown, the immediate impact on the Babylon ecosystem is undeniable.
Lombard Finance orchestrates a transition
Amidst uncertainties, Babylon Labs shared a post from Lombard Finance on X (formerly Twitter), indicating that this massive withdrawal is part of a planned strategy. The DeFi protocol has indeed initiated a transition to a new group of validators. To avoid any disruption in the rewards mechanism, the disengagement has been coordinated with the end of Babylon’s phase 1 cap 1, scheduled for April 24.
Lombard Finance has stated that all the BTC involved will be restaked once the unbonding period is over. This statement is meant to alleviate concerns, although Babylon Labs has not yet officially commented on the event.
Speculations on the origin of the funds
As is often the case in the crypto world, the lack of transparency fuels theories. Some community members suggest a possible involvement of the Chinese government, while others see it as a simple profit-taking or strategic portfolio rotation. In the absence of identification of the address owners involved, uncertainty persists.
It is worth noting that this withdrawal comes two weeks after a massive airdrop orchestrated by Babylon. On April 3, the protocol distributed 600 million BABY tokens to its initial stakers, developers, and NFT holders. The next day, nearly $21 million in BTC had already been withdrawn — a typical behavior of a market seeking liquidity after an airdrop, according to several analysts.
A central protocol in the Bitcoin DeFi ecosystem
Babylon has established itself in a matter of months as one of the pillars of Bitcoin DeFi. Its TVL surpassed $6 billion last December. Its proposition is simple yet ambitious: to enable native Bitcoin staking without intermediaries, relying on a robust decentralized model.
While the current drop in TVL raises questions, the protocol still holds a central position in experimenting with a new generation of DeFi services built on the Bitcoin network. The announced return of funds to staking will be a crucial test to measure the strength of institutional actors’ trust in Babylon.
