DeFi liquidity saw outflows in October, while protocols shifted their holdings. On-chain liquidity moved to Bitcoin-based protocols, as well as to Hyperliquid and Robinhood.
DeFi liquidity is shifting between chains and protocols in October, and taking a step back with a 7% contraction.
The market capitalization of DeFi protocol tokens contracted by a net 8.4% in the past 30 days, while total value locked, around 7% in October, based on CryptoRank data. The value in DeFi is a proxy metric, reflecting both user flows and the value of collateral assets.
DeFi tokens reacted more dramatically, with over 20% in net losses over the past month, while the protocols themselves had smaller outflows of value. The recent slowdown in DeFi cuts short a three-month streak of expanded TVL based on Ethereum staking and lending.
DeFi growth hinges on BTC recovery
For the past month, Bitcoin-based DeFi protocols were the fastest gainers, as BTC held between $80,000 and $85,000. In total, BTC-based DeFi protocols hold $6.19B in value, expanding by 39.19% in the past 30 days.
DeFi collateral was more diverse in 2026, with a growing share on BTC-based lending. | Source: DeFi Llama
For Bitcoin protocols, most older apps remained stagnant, while liquidity flowed to selected venues. For the past 30 days, Surge Credit, Maya Protocol, and Symbiosis were in the green, while other apps showed small outflows below 5%.
For now, most of the BTC-based DeFi still relies on wrapped versions running on Ethereum. However, Aave V4 is seen as a potential alternative, using the Babylon Labs collateral for lending, without wrapping the coins on Ethereum.
Wrapping assets adds another layer of risk, as the collateral is locked in smart contracts that could be attacked. BTC holders are seeking native ways to put BTC to work with lending, without exposing their holdings to that additional risk.
Morpho, Ace draw in more active DeFi deposits
DeFi liquidity has also shifted among protocols, with some apps and chains defying the recent outflows. In the past month, Base flipped Solana as the third-largest liquidity venue, standing behind Ethereum and Bitcoin.
The past month’s most significant growth came from Arc, a newly launched mainnet and liquidity app. Arc expanded its holdings by 21% in October, holding a total of $617.8M as of October 28.
While the leaders Lido and Aave lost their notional TVL, Morpho expanded by over 3% in the past 30 days, showing users moved their funds for specific vaults and liquidity.
Morpho retains the usual rate of daily active users for the past year, which has still not recovered to the levels at the end of 2025. Despite this, the protocol saw wider adoption, based on its integration with other wallets and apps. Morpho has around 16.1K daily active users, close to the baseline for 2026.
DeFi is reinventing its allocations and lending rates, with Morpho offering innovation in lending rates. Recently, the protocol also integrated with Ledger for direct access to some of its vaults. Morpho has also started onboarding tokenized assets as collateral , unlocking additional value beyond crypto collateral.
In 2026, DeFi also had to adapt to a series of chain and protocol shutdowns and redirect users and liquidity, as Cryptopolitan reported . In the past year, staple protocols like Balancer, Radiant, ZeroLend and Seamless shut down, on a mix of hacking losses or low liquidity.
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