It’s been a rough few months for Sonic, the blockchain formerly known as Fantom. The network’s total value locked, or TVL, has taken a serious hit. According to data from DeFiLlama, it’s fallen from about $1.1 billion back in May to just $367 million as of today. That’s a drop of nearly 70 percent.
For a bit of context, that’s a far cry from the heights its predecessor reached. Fantom’s TVL once touched nearly $9 billion in early 2022. So this recent decline is raising some eyebrows. It makes you wonder about the staying power of newer chains trying to carve out a space.
What’s Behind the Drop?
A lot of this seems to coincide with the end of Sonic’s five-year arrangement with the market maker Wintermute. It highlights a real problem for new Layer 1 blockchains: keeping users and their money around isn’t easy. When the deal wrapped up, Sonic’s Chief Strategy Officer posted on X that this move was necessary for the ecosystem’s projects to truly “thrive,” suggesting that just relying on centralized exchange support wasn’t going to cut it anymore.
Sonic’s CEO, Michael Kong, has been pretty open about it. He told The Defiant that while TVL is important, it doesn’t show you everything. He thinks it’s natural for these numbers to swing wildly in crypto. The goal, he says, is still to get back to the kind of numbers Fantom once had. The team is apparently focused on building what they call “institutional scale,” with plans for a U.S. ETF and something called a digital asset treasury.
A Tough Strategic Choice
But not everyone’s convinced it’s that straightforward. Mike Maloney, CEO of Incyt, called the situation a “double-edged sword.” He pointed out that market makers like Wintermute do bring volume and better trading spreads, which is good. But they also take fees that might otherwise go to regular users. And when they leave, they tend to take huge chunks of liquidity with them.
Maloney thinks Sonic is at a real crossroads now. It has to choose between relying on professional market makers to create a efficient trading environment, or grinding it out the hard way to build something more organic and decentralized.
The Problem with Chasing Yield
Then there’s the issue of incentives. Brian Huang, from Glider, put it pretty bluntly: “Yield-seekers are mercenaries.” He’s seen this pattern before. A new chain—or in this case, a rebranded one—launches with big rewards to draw people in. But when those rewards dry up or become less valuable, that capital just picks up and moves to the next opportunity.
It looks like that’s exactly what’s happening. The value of Sonic’s native token, $S, has fallen about 69% since its launch. A lot of the incentives were paid out in $S, so as the token’s price drops, the attractive yields start to look pretty weak. People getting rewards are selling them, which just pushes the price down further in a tough cycle.
Huang’s point is simple: TVL only really matters if there’s real borrowing activity generating yield. The question now is whether Sonic can build that genuine utility, or if it’ll keep leaning on incentives that might not last.
