In a significant on-chain move, over $1.26 billion in Bitcoin has been unstaked from Babylon, a leading Bitcoin staking protocol, prompting a 32% drop in total value locked (TVL). The event comes amid Babylon's ongoing infrastructure transition and shortly after a major airdrop to early supporters.
On April 17, blockchain analytics firm Lookonchain reported a wave of Bitcoin withdrawals from Babylon, with 14,929 BTC removed across four addresses. The largest of these addresses alone unstaked 13,129 BTC - equivalent to roughly $1.1 billion, based on Bitcoin’s price at the time of ~$84,400.
The withdrawals triggered a steep decline in Babylon’s TVL, which fell from $3.97 billion to $2.68 billion, according to DeFiLlama. While the sudden exit sparked market speculation, the reasons appear to be more procedural than panic-driven.
Babylon Labs, the development team behind the protocol, indirectly confirmed the event’s context by retweeting a statement from Lombard Finance, a DeFi protocol actively using Babylon’s staking services. According to Lombard, the BTC was being unstaked as part of a planned transition to a new set of finality providers - a move designed to optimize network integrity and prepare for the end of Babylon’s “Phase 1 Cap 1” on April 24.
Importantly, Lombard reassured users that the BTC would “be staked back into Babylon as soon as the unbonding is complete,” framing the move as temporary and operational rather than a loss of confidence in the protocol.
While speculation ran wild on X, with some suggesting the involvement of sovereign entities like the Chinese government, no concrete attribution has been made. What’s clear is that the majority of the unstaked BTC came from just a handful of high-value addresses, raising questions about concentration and transparency in large DeFi ecosystems.
Still, the lack of clarity hasn’t significantly eroded market confidence, especially in light of Lombard’s commitment to re-staking the assets.
This isn’t Babylon’s first brush with major capital shifts in recent weeks. Earlier this month, the platform conducted a highly anticipated airdrop of 600 million BABY tokens, targeting early stakers, NFT holders, and developers. Shortly after the airdrop, users unstaked around $21 million in BTC - a move described by Bitlayer co-founder Kevin He as “common short-term redemption behavior” following such incentive events.
These exits are often temporary and tied to participants taking profits or adjusting positions post-airdrop.
Launched to bring native staking to Bitcoin without requiring custodial trust, Babylon has quickly grown into one of the largest players in Bitcoin DeFi. Its TVL reached $6 billion in December, a remarkable figure for a protocol centered around BTC’s traditionally non-yield-bearing ecosystem.
According to co-founder Fisher Yu, Babylon's goal is to make Bitcoin staking as secure and decentralized as possible, enabling users to participate in proof-of-stake economics without wrapping BTC or relinquishing custody.
Despite the current TVL contraction, Babylon’s long-term vision and technical roadmap appear intact. With staking expected to resume once unbonding periods expire and new infrastructure is in place, the protocol may soon regain its liquidity base.
Babylon’s TVL dropped 32% after 14,929 BTC was unstaked - mostly by a single whale wallet - amid a planned protocol transition. While the move caused temporary disruption, the assets are expected to be re-staked, and community trust remains largely intact following clarification from Lombard Finance.