- Bitcoin narratives around NFTs, layer-2s, and re-staking have significantly cooled from their peak hype phases, with Bitcoin NFT trading volume dropping 80% in Q1 2025 compared to Q1 2024.
- Bitcoin layer-2 networks are transitioning from speculative hype to a maturation phase, with industry experts suggesting they should be viewed as long-term infrastructure for Bitcoin DeFi development.
- Only 0.3% of Bitcoin’s market cap is currently active in DeFi compared to Ethereum‘s 30%, suggesting significant growth potential as the ecosystem develops.
Bitcoin’s most hyped narratives have faded substantially in early 2025, with NFTs, layer-2 networks, and re-staking projects experiencing dramatic declines in investor interest and market activity. According to Bitlayer co-founder Charlie Hu, these once-dominant themes have “completely gone” as the ecosystem shifts focus toward sustainable development rather than speculative growth.
The decline in Bitcoin NFTs is particularly striking. Data from CryptoSlam shows that trading volume collapsed from $1.4 billion in Q1 2024 to just $280 million in Q1 2025—an 80% drop. This sharp decline signals that the “1,000x days” that characterized the initial Ordinals boom have likely ended.
“Bitcoin layer-2s are providing architecture as a programmable, trust-minimized kind of infrastructure that could provide yield for the Bitcoin whale holders or institutions. That’s a very important narrative. I think we’ll expand more and more with the use cases with adoption,” Hu explained.
The layer-2 narrative, which dominated early 2024 with approximately 80 projects seeking funding, has similarly cooled. Many crypto executives, including Stacks co-founder Muneeb Ali, have acknowledged this trend, with Ali previously stating that the “honeymoon phase” for Bitcoin layer-2s had ended and predicting most projects would eventually disappear.
Bitcoin re-staking projects have faced a similar fate, with Hu noting that only two or three projects remain viable from the peak hype phase in 2024.
Despite waning excitement around these narratives, industry experts maintain optimism about Bitcoin’s fundamental ecosystem development. Dominik Harz, co-founder of hybrid layer-2 protocol Build on Bitcoin (BOB), emphasized that short-term perspectives miss the bigger picture.
“Looking at Bitcoin Layer-2s through a short-term lens misses the point. Hype cycles come and go, but lasting developments in crypto, like Bitcoin itself, are inherently long-term plays,” Harz stated.
A key metric highlighted by Harz shows Bitcoin DeFi’s untapped potential: only 0.3% of Bitcoin’s market capitalization is currently active in decentralized finance, compared to Ethereum’s 30%. This 100x discrepancy suggests significant room for growth as technical infrastructure matures.
Max Sanchez, CTO of layer-2 protocol Hemi Labs, argued that the Bitcoin layer-2 space isn’t losing momentum but rather entering a maturation phase where fundamentals matter more than speculation. Sanchez criticized early projects for simply transplanting Ethereum technology without proper adaptation to Bitcoin’s architecture.
Interoperability with Ethereum-based protocols remains contentious within the Bitcoin development community. Sanchez, who works on a hybrid Bitcoin-Ethereum project, challenged the notion that layer-2 networks should develop in isolation, suggesting that cross-chain compatibility may be necessary for broader adoption.
As hype cycles fade, the focus appears to be shifting toward building sustainable infrastructure that can support genuine use cases rather than short-term price movements, potentially setting the stage for Bitcoin’s next phase of development.
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