Babylon sees $1.2 billion Bitcoin unstaked as TVL drops 32%

Babylon (CRYPTO:BABY), a Bitcoin (CRYPTO:BTC) staking protocol, experienced a significant outflow as $1.26 billion worth of Bitcoin was unstaked, leading to a 32% decline in its total value locked (TVL).

On April 17, blockchain analytics firm Lookonchain identified four wallet addresses responsible for the movement of 14,929 Bitcoin from the protocol.

One of these addresses alone accounted for $1.1 billion of the unstaked assets, with Bitcoin trading near $84,400 at the time.

Following the event, Babylon’s TVL decreased from $3.97 billion to $2.68 billion, according to data from DeFiLlama.

The unstaking activity has sparked speculation in the crypto community regarding the identity of the wallet holders.

Some users on social media suggested the Bitcoin could be linked to the Chinese government, while others proposed it might be a strategic rotation, a risk-off move, or simply a trader’s liquidation.

No definitive information has been provided about the owners of the addresses.

The timing of the unstaking coincided with an announcement from Lombard Finance, a decentralised finance protocol, which stated it was moving Bitcoin as part of a transition to a new set of finality providers.

“All of this BTC will be staked back into Babylon as soon as the unbonding is complete,” Lombard clarified, as Babylon Labs retweeted his message to reassure users about the temporary nature of the withdrawal.

Lombard also noted that the unstaking was coordinated with the end of Babylon’s phase 1 cap 1 on April 24 to ensure users did not miss out on rewards.

This major movement comes shortly after Babylon’s airdrop for early adopters, which distributed 600 million BABY tokens to phase 1 stakers, NFT holders, and developers.

Following the airdrop, $21 million in Bitcoin was also unstaked, which Bitlayer (CRYPTO:BTR) co-founder Kevin He described as a typical short-term market reaction.

Babylon, which reached over $6 billion in TVL in December, has positioned itself as a key player in Bitcoin DeFi by enabling non-custodial staking and integrating with multiple blockchains.

At the time of reporting, the Babylon (BABY) price was $0.0748, and the Bitcoin (BTC) price was $84,819.27.