'Liquidity Crisis': $12B in DeFi Liquidity Sits Idle as 95% of Capital Goes Unused

Web3 Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email 'Liquidity Crisis': $12B in DeFi Liquidity Sits Idle as 95% of Capital Goes Unused This inefficiency disproportionately affects retail liquidity providers, with 50% losing money due to impermanent loss, and net deficits exceeding $60 million, a new report finds. By Francisco Rodrigues | Edited by Aoyon Ashraf Nov 22, 2025, 4:07 p.m. 1inch co-founders Anton Bukov (left) and Sergej Kunz (1inch Network) What to know : A report by 1inch finds that 83-95% of liquidity in major DeFi pools, such as Uniswap and Curve, is idle, with billions of dollars not earning fees or generating returns. This inefficiency disproportionately affects retail liquidity providers, with 50% losing money due to impermanent loss, and net deficits exceeding $60 million. 1inch proposes a solution with its Aqua protocol, which aims to optimize liquidity usage by allowing DeFi applications to share a common capital base, reducing fragmentation and increasing returns for liquidity providers. A new report from decentralized exchange aggregator 1inch has shown a growing crisis in decentralized finance (DeFi): the vast majority of capital deployed in major DeFi liquidity pools is not being used effectively. According to data presented at Devconnect Buenos Aires, between 83% and 95% of liquidity in top pools, including Uniswap v2, v3, and v4, as well as Curve, remains idle for most of the year. That means billions of dollars sit in smart contracts without earning fees or generating meaningful returns. STORY CONTINUES BELOW Don't miss another story. Subscribe to the The Protocol Newsletter today . See all newsletters Sign me up By signing up, you will receive emails about CoinDesk products and you agree to our terms of use and privacy policy . In Uniswap v2 alone, only 0.5% of liquidity typically falls within active trading price ranges, rendering nearly $1.8 billion ineffective according to the report. This inefficiency hits retail participants the hardest. Research cited in the report shows that 50% of liquidity providers (LPs) are losing money when factoring in impermanent loss, with net liquidity provider deficits exceeding $60 million. In one notable example, a single Uniswap v3 pool saw over $30 million in lost profits due to Just-in-Time liquidity manipulation. Part of the problem stems from the sheer number of fragmented pools, with more than seven million across the ecosystem. This complexity not only dilutes liquidity but also makes it harder to route trades efficiently, further reducing returns for liquidity providers. 'New approach' To 1inch, the solution is its Aqua protocol, which is designed to let DeFi applications share the same capital base across multiple strategies without compromising user custody. “We address this problem by introducing a new approach," 1inch cofounder Segej Kunz told CoinDesk in an interview at Devconnect Buenos Aires. "We allow people to just keep assets in the wallet, and we allow people to create virtual trading positions." To Kunz, the current situation constitutes a "DeFi liquidity crisis." The protocol also aims to lower the barrier to entry for developers who want to utilize this deep liquidity. "Any existing DEX right now can be implemented under 10 lines of code," Kunz added, noting that the goal is to provide "a foundation to build on top" so that liquidity providers can "hold assets in the wallet" rather than locking them inside complex protocol contracts. 1inch Decentralized Finance Liquidity Exclusive More For You Protocol Research: GoPlus Security By CoinDesk Research Nov 14, 2025 Commissioned by GoPlus What to know : As of October 2025, GoPlus has generated $4.7M in total revenue across its product lines. The GoPlus App is the primary revenue driver, contributing $2.5M (approx. 53%), followed by the SafeToken Protocol at $1.7M. GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month. Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B. View Full Report More For You Aerodrome Finance Hit by 'Front-End' Attack, Users Urged to Avoid Main Domain By Francisco Rodrigues | Edited by Aoyon Ashraf 39 minutes ago The attack did not compromise the underlying smart contracts, but users are advised to avoid the compromised domains and instead use decentralized ENS domains. What to know : Aerodrome Finance, a decentralized exchange on Coinbase's Base network, was targeted in a front-end attack, with attackers using DNS hijacking to reroute users to phishing sites. The attack did not compromise the underlying smart contracts, but users are advised to avoid the compromised domains and instead use decentralized ENS mirrors to access the protocol. The incident is under investigation, and it is unclear if any losses have occurred, but Aerodrome's team is urging users to revoke recent token approvals and avoid signing transactions from unverified domains. 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