Bitcoin staking protocol Babylon saw $1.26 billion in BTC unstaked from its platform, plunging the protocol’s total value locked by 32%.
On April 17, blockchain analytics firm Lookonchain flagged several addresses that had unstaked 14,929 Bitcoin (BTC) from the staking platform. The security firm flagged four addresses that unstaked 299 BTC, 499 BTC, 1,000 BTC and 13,129 BTC.
One address held a majority of the unstaked assets worth $1.1 billion. With BTC prices hovering at $84,400, the total unstaked BTC is worth about $1.26 billion.
The unstaking event saw Babylon’s total value locked (TVL) drop by 32%. According to data tracker DefiLlama, Babylon’s TVL dropped from $3.97 billion to $2.68 billion during the unstaking.
Unstaked Bitcoin may be “staked back” to Babylon
Community members are speculating on who was behind the unstaking. One X user suspected that the Bitcoin may belong to the Chinese government, while another said the move may simply be a rotation, risk-off, or a trader getting liquid.
While it’s unclear who’s behind the four addresses cited by Lookonchain, the fund movements could be related to a transition initiated by the decentralized finance (DeFi) protocol Lombard Finance.
At the time of the unstaking, Babylon Labs retweeted an announcement from Lombard, saying it was unstaking Bitcoin as part of a transition to a new set of finality providers.
Lombard Finance said it timed the unstaking with the end of Babylon’s phase 1 cap 1 on April 24 so users would not miss out on rewards. The protocol said it would stake the assets back.
“All of this BTC will be staked back into Babylon as soon as the unbonding is complete,” Lombard Finance wrote.
Cointelegraph reached out to Babylon Labs for comments but did not get a response by publication.
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Bitcoin unstaking follows BABY airdrop
The massive unstaking event follows a Babylon airdrop for early adopters. On April 3, Babylon announced the details of its early adopters airdrop program. The airdrop was allocated for its Phase 1 stakers, non-fungible token (NFT) holders, and developers. The protocol allocated 600 million BABY tokens for the airdrop event.
Following the airdrop, $21 million in BTC were unstaked from the protocol. Bitlayer co-founder Kevin He previously told Cointelegraph that this was a common short-term market behavior representing early redemption.
Babylon is one of the largest Bitcoin DeFi players in the space, with a TVL reaching over $6 billion in December. Babylon co-founder Fisher Yu previously told Cointelegraph that the platform allows staking to be a native use case for Bitcoin, eliminating the need to trust another party while staking.
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