After months of keeping over 50,000 Bitcoin (BTC) locked, Babylon Labs saw a sudden large outflow. Whales unlocked 14,929 BTC from the protocol just as Babylon launched its Genesis L1 chain.
Babylon Labs lost 14,929 BTC previously locked for staking and point farming. The protocol held over 57K BTC just as it launched its Babylon Genesis L1 chain and airdropped the native BABY token.
The tokens were unstaked and withdrawn to four anonymous addresses, of which the biggest one held $1.1B in BTC. Since the withdrawals, the BTC was not moved, remaining in new anonymous addresses. Potentially, the withdrawals could be sent back to the original depositors, either whales or retail.
As a result, Babylon’s smart contract is now secured by just 31,701 BTC. The withdrawals lowered the TVL of the protocol down to $2.76B. Previously, Babylon Labs held nearly 50% of all locked and staked BTC for DeFi projects.
Babylon Labs did not see withdrawals since its latest lockup events in January. The protocol has not announced any specific events or incentives, in order to boost its locked BTC.
Babylon Labs causes potential BTC selling pressure
Until recently, Babylon Labs surpassed even Mara Holdings and some of the top corporate treasuries with its locked BTC. The protocol also offset the outflows of BTC from the WBTC smart contract, which also suffered from withdrawals. However, Babylon Labs also showed it could become the source of selling pressure.
The value locked aims to secure a single chain, with more coming in the future. Babylon Labs still has incentives in place to encourage locking more BTC, by rewarding stakers with the native BABY token.
The price of BABY has fallen to $0.08 since the token generation event, and the incentives are not aligning with BTC holders. BABY also fell after the end of a special trading period on the LBank exchange, and looks like facing more selling pressure from early airdrop recipients. Babylon Labs has designed BABY for additional staking and rewards, but at one point, delegates and validators will sell the token to lock in value.
Additionally, BTC is facing price pressures while trading at $84,717.00. The potential selling of $1.26B in BTC can extend the downward trend.
The non-custodial staking on Babylon is mostly linked to delegates, who also take and redistribute the rewards from holding BTC. After the withdrawal, Lombard and Solv Protocol remain the biggest depositors on behalf of users. Babylon Labs hosted deposits from 135,323 individual users who chose one of the top depositors.
The withdrawals are not linked to any specific delegator, though Acorn Protocol recently lowered its share of deposited BTC. Babylon Labs has daily fluctuations of up to $8M with inflows and outflows, but the recent unstaking is the biggest outflow of value since the protocol launched.
Currently, Lombard Finance is trying to boost staking while adding DeFi startups secured by BTC. However, the potential rewards from BABY tokens and the risk of holding BTC during turbulent times have made some depositors reconsider their position.
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