February 2025 Public Chain Market Review: Challenges and Innovations Amid Adjustments

In February 2025, the blockchain market experienced significant adjustments, posing challenges to both established networks and emerging public chains. Bitcoin demonstrated resilience, further solidifying its dominant position, while most chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Despite this, development activity in the public chain space remained vibrant: the Berachain mainnet launch, Base infrastructure upgrades, and the rollout of Uniswap's Layer 2 solution became highlights of the month.

Market Overview

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

This pullback closely follows the bull market of January, but market signals are complex, with investors oscillating between optimistic sentiments and concerns over security vulnerabilities. Market sentiment has worsened, and risk appetite has decreased, especially in speculative areas like Memecoins. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market feels the impact of hacker attacks more intensely.

Regulatory and Policy Trends

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

Investor behavior reflects this turbulence. The Memecoin craze driven by Argentine President Milei's related tokens has quickly cooled due to negative news, leading to a sharp drop 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 increased from 71.3% to 74.2%, while Ethereum's share shrank from 14.0% to 11.9%. A well-known chain's share slightly rose to 3.7%, but Solana's share fell from 4.0% to 3.3% after a price drop of 36.3%.

Litecoin is rising against the trend, up 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others are lagging 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 strong contender, quickly rising to sixth place after the mainnet launch on February 6, with a TVL of $3.2 billion. The chain has issued 80 million BERA tokens and employs a "Proof of Liquidity" model—an innovative staking method that transforms liquidity into network security. Following a $100 million funding round in 2024, this month's airdrop and governance incentives have sparked market enthusiasm. Unlike traditional Proof of Stake, this approach could redefine how public chains balance growth and stability, making Berachain a project worth watching.

The Memecoin craze of Solana has clearly cooled down. High-profile failures, such as the token associated with Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volumes on certain DEX platforms. While Memecoins are unlikely to disappear and can be seen as digital collectible cards, their peak frenzy may have passed, and traders are beginning to focus more on 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 (down 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed well, dropping only 7.9% to $220 million.

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

The downturn in this field aligns with the views of Stacks co-founder Muneeb Ali at Consensus 2025: "As the initial enthusiasm wanes, over 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's downturn in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may prove to be more resilient than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased by 23.4% to $14 billion. A well-known platform maintains its leading position with a TVL of $4.5 billion (down 33.3%), while Base rises to second place with a TVL of $4.2 billion (down 10.6%), pushing Optimism ($2.1 billion) to third. Polygon zkEVM surged by 104.1% to $30 million, becoming a rare highlight this month.

Base has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aimed at maintaining user stickiness. 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 several heavyweight institutions having joined. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

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

Vitalik Buterin commented on February 19, emphasizing that Ethereum needs to clarify its positioning in the increasingly fierce competition. He advocates for Layer 2 to take a leading role in scalability (such as a 17 times transaction increase) and interoperability, noting 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 Status

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