Institutional inflows, gaming adoption and network upgrades fuel Avalanche’s DeFi rebound.
Layer 1 blockchain Avalanche’s total value locked (TVL) has more than doubled over the past two quarters, driven by a combination of institutional inflows, gaming ecosystem expansions and network upgrades.
Avalanche’s TVL is hovering near $2.1 billion, up sharply from $1 billion in April, according to DeFiLlama.
Several developments have contributed to the rebound. Earlier this year, Avalanche announced its Octane upgrade, which led to cheaper gas fees. And then in June, asset manager VanEck announced it would launch a private digital asset fund, the VanEck PurposeBuilt Fund, targeting projects on Avalanche.
Gaming projects on Avalanche also gained traction over the summer, particularly MapleStory, which helped to push total transactions from 620 million in all of 2024 to more than 1.4 billion in the first half (H1) of 2025, The Defiant reported in July. Meanwhile, in August, investment firm SkyBridge Capital revealed plans to move roughly $300 million of assets onto the Avalanche blockchain.
Experts say these factors have created favorable conditions for liquidity and decentralized finance (DeFi) on Avalanche.
“There’s a mix of factors responsible for the rebound in my opinion, with the Octane upgrade lowering fees and improving efficiency, while institutional inflows linked to tokenization and treasury vehicles bring in more capital,” said Nic Puckrin, CEO and founder at Coin Bureau. “The result is a cheaper and more popular network and AVAX’s price shows that, recovering and encouraging staking and liquidity provision as DeFi activity and stablecoin adoption expand.”
AVAX is currently changing hands at $29, a 52% increase over the past 3 months, per CoinGecko.
Puckrin added that the growth strengthens Avalanche’s position as a hub for both tokenized real-world assets (RWAs) and DeFi.
“With more liquidity and cheaper transactions, devs and users alike have stronger incentives to build and participate,” he said. “This means Avalanche is more equipped to compete directly with Solana and Ethereum’s Layer 2s, particularly in areas where tokenization is gaining traction.”
Still, Puckrin cautioned that most of the growth heavily depends on institutional demand, “leaving Avalanche vulnerable if these flows turn in the opposite direction.”
The network’s strong focus on tokenized assets is also subject to regulatory scrutiny, which can delay progress. “Subnet fragmentation remains a concern if activity spreads too thin,” Puckrin said. “And let’s not forget that TVL can be misleading, as inflow can fade as fast as it arrives without sticky users and protocols.”
Doug Colkitt, Initial Contributor to Fogo, agreed with Puckrin’s sentiment, noting that “TVL is a blunt metric, but doubling in a few months tells you the ecosystem has found product-market fit in niches like RWAs and DeFi derivatives.”
Colkitt added that “the question now is whether that liquidity sticks around once incentives cool, or whether it’s just another mercenary wave.”
The blockchain, like the broader DeFi market, experienced a downturn earlier this year after the post-election rally. Avalanche’s TVL fell from $1.7 billion in mid-December 2024 to just $1 billion in April before beginning its sharp recovery.
“The challenge now is turning the traction into sustainable, broad adoption rather than relying on short-term capital surges,” Puckrin concluded.
