Berachain entered 2025 as one of the most technically ambitious and hyped Layer 1 chains, rapidly distinguishing itself with a cutting-edge Proof-of-Liquidity consensus, a tri-token architecture (BERA as gas, BGT for governance, HONEY as a stablecoin), and seamless EVM compatibility with Cosmos SDK. The chain’s attractively modular BeaconKit framework, more than $142 million in venture backing, and instant support from blue-chip DeFi infrastructure like Chainlink and The Graph fueled expectations of dominance.
Within weeks of launching in February 2025, Berachain surged to over $2 billion in TVL, placing it just behind giants like Arbitrum and Base and signaling deep investor and developer excitement. The pace of integrations (Coinbase and Binance) and the number of new apps building on top Berachain reinforced its reputation as a next-generation, liquidity-aligned blockchain.
But sadly the numbers didn't stayed long, it declined faster then the Chain TPS. As of writing Berachain saw massive outflow from its chain and dominance continuously diminishing.
I. Q1 2025: The Fading Numbers
Following its highly anticipated mainnet launch in February 2025, Berachain experienced an initial surge of activity, quickly accumulating an impressive $3.2 billion in Total Value Locked (TVL) within its first month. This rapid accumulation initially positioned it as a significant contender in the DeFi space.
However, as Q1 2025 progressed, this initial momentum proved fleeting, and key on-chain and market metrics began to show a concerning downward trend, raising questions about the network's ability to sustain its early promise.
❍ Declining Metrics:
Total Value Locked (TVL): From its peak of $3.2 billion in its first 30 days post-launch, Berachain's TVL has experienced a substantial contraction. As of early June 2025, the Total Value Locked stands at approximately $989.21 million.
Earlier reports also indicated a significant 22% drop in TVL, declining from $2.099 billion to $1.634 billion. This substantial capital outflow suggests that a considerable portion of the initial TVL was transient, "hot money" driven by short-term incentives rather than long-term commitment.
User Activity (Daily Active Users - DAU): The network has witnessed a sharp decline in user engagement. While Dune Analytics data from May 2025 indicated daily active accounts reaching highs of approximately 471.9k, current figures show a significant drop to 21,812 Daily Active Accounts as of early June 2025.
This represents a dramatic decrease from peak activity. Overall, Berachain has experienced a reported 33% decrease in daily active users, with total accounts currently standing at 2,610,457.
Transaction Volume: Daily transaction counts have also receded from their highs. While peak daily transactions in May 2025 reached approximately 1.5 million, the network currently processes around 699,960 daily transactions.
The cumulative total transactions on Berachain are 116,523,720. Daily decentralized exchange (DEX) volume is reported at $14.72 million, and perpetuals volume at $154,588, indicating reduced trading activity across its core DeFi applications.
BERA Token Performance: The native BERA token has exhibited extreme volatility and a significant depreciation in value since its launch. It debuted at nearly $15 at its all-time high but swiftly plummeted to $8 within hours due to immediate sell-offs. Subsequently, BERA continued its decline, reportedly dropping by 50% in a single month, and is currently trading around $2.5.
This represents a substantial depreciation from its peak. Its market capitalization, currently around $250 million, has fallen significantly from an implied peak of approximately $800 million.
II. Why Did It Go Wrong? Problems & Rapid TVL Unwind
Reliance on Unsustainable Pre-Launch Liquidity
Berachain’s meteoric TVL growth was driven in part by pre-deposit vault programs (notably Royco’s “Boyco”), which lured over $3 billion pre-mainnet from passive, mercenary investors focused on rewards rather than long-term engagement.
Over 66% of assets remained unborrowed post-launch, meaning much of the TVL was “dead capital” and not actively supporting on-chain activity. This dynamic left the network highly vulnerable to post-incentive flight and failed to generate organic on-chain demand. When initial rewards dried up, liquidity and users left en masse.
Underwhelming Utilization and Borrowing
The lack of robust borrowing options and underused vaults meant users had few reasons to remain once incentives waned, as evidenced by the rapid TVL slump and a collapse in cross-chain interest. Without true capital utilization and yield cycles, Berachain’s PoL DeFi universe remained shallow.
Market Structure and Incentive Complexity
Although PoL aimed to foster deep, ecosystem-aligned liquidity, the actual emissions model proved complex and was regularly adjusted by Berachain’s governance council, at times confusing users and protocols. Reward vault requirements were strict, and many projects faced delisting if they couldn’t comply, further raising uncertainty.
Perception of Extractive Strategies & Trust Issues
The network’s “yield farming for emissions” core, combined with a sudden outpouring of liquidity and little sticky user base, spooked investors. Rapid downtrends in key metrics (TVL, users), vault missteps, bug reports (like the Bearn POL incident), and recurring contract upgrades amplified trust issues.
BGT Premium and BERA Inflationary Pressure
This creates a negative feedback loop: lower BGT premium leads to less LP activity, which then leads to more BGT being burned for BERA, resulting in increased BERA inflation and further downward pressure on BERA's price. The core challenge lies in the delicate balance of the tri-token model and the PoL mechanism.
A critical challenge identified in the current PoL model relates to the BGT premium, the market value of BGT relative to BERA. While this premium initially amplifies LP yields, a proposal (PoL v1.1) to introduce a dynamic fee on incentives aims to reduce this premium. However, lowering the BGT premium could "reduce LP APRs and incentive attractiveness," leading to a "decline in LP activity" and "reduced demand for BGT". More critically, a lower BGT premium makes users "more likely to redeem BGT for BERA" at a 1:1 ratio. This redemption mechanism, intended as a balance, paradoxically increases the circulating supply of BERA, "reintroducing inflationary pressure" and "defeating the purpose of creating long-term BERA scarcity".
The very incentives designed to attract liquidity (high BGT yields via bribes) are proving unsustainable, and attempts to stabilize the BERA token (by reducing BGT premium and promoting BERA accrual) risk dismantling the initial liquidity flywheel. This suggests that Berachain's economic model, while innovative, may be prone to a "death spiral" if not managed perfectly, where attempts to fix one problem exacerbate another, leading to a continuous decline in key metrics.