Alpaca Finance is an alpaca financial platform that once obtained a leveraged income-based agricultural platform that has announced its closure with financial difficulties and market challenges that affect users and the wider Defi ecosystem.
Why does alpaca finance fail?
On May 26, 2025, Alpaca Finance, a well-known decentralized financing (DEFI) protocol known for its leveraged production agriculture on the BNB chain, announced its decision to reduce operations.
The decision follows a “wide internal review” and a thorough assessment of the possible path forward. The team said the decision was to “maintain our community and ensure elegant and safe rainfall.”
But what led to the huge decision after four years of operation? The reasons are multifaceted, rooted in financial struggles, market dynamics and strategic mistakes.
Alpaca Finance has been struggling to cope with consistent financial losses, a common challenge to the Defi protocol in an increasingly competitive landscape. The platform’s blog post introduces macro factors such as the ever-changing Defi market, a decline in user engagement and a decrease in output, which seriously affects its viability.
Binance gave alpaca horns to It has dealt a “major blow” to the project. This will allow limited Alpaca Finance’s limited capabilities to attract new users and pursue innovative programs, effectively preventing its growth.
The team also noted in the announcement that the protocol strives to adapt to evolving market conditions such as the rise of updated, more efficient Defi platforms that offer better output and lower risks.
In addition to external factors, internal challenges also play a role. Despite being a fair start-up project without pre-sales or pre-sales, alpaca finance failed to maintain a sustainable tokenological model.
Between April 2025 and May 2025, Alpaca Finance’s social media accounts are largely inactive, with no latest information on new developments, partnerships or efforts to address community concerns.
Defilama data further highlights the struggle of the protocol. Alpaca Finance’s Total Value Lockdown (TVL) peaked at more than $900 million in early 2022, but has since fallen to $54.6 million as of May 2025, down more than 94%. This dramatic reduction in TVL reflects the loss of user trust and engagement as yield farmers turn to more stable or innovative platforms.
Source: Defillama
The combination of collapsed cost price, low transaction volume and reduced TVL became a double-edged sword that lowered the project.
Pumping Drama: Calculated Exit Policy?
Alpaca Finance experienced a huge price increase before the closure, attracting the attention of the cryptocurrency community.
this Alpaca In April 2025, the token soared 700%, reaching a significant high before the final crash. The pump is largely driven by a brief squeeze, where traders who bet on tokens are forced to buy back at a higher price, further exacerbating the rally.
Read more: Alpaca Token Shocking Ride: Short Squeeze, Freeze and Looming
However, this huge pump adds the red flag. Despite the lack of basic developments, the price surge occurred, and the project canceled the token issuance and burned some tokens to reduce the circular supply, a kind of artificial “squeezing out” people who are rising prices. As the user sarcastically said, “What’s the point of burning tokens if you’re going to turn it off?”
This sentiment reflects a wider skepticism: The pump may have been carefully planned to allow insiders or large holders to dump their tokens at profits before closing.
The subsequent 30% price fell to $0.112 within 24 hours of the closure announcement, with a market cap of $17 million, confirming the dump. Alpacas are currently priced at their all-time high of $8.78 (ATH), representing a staggering 99% drop, leaving retail investors feeling betrayed.
Source: Coingecko
Pumping mode indicates a lack of long-term vision. The lack of a clear roadmap post-pump table suggests that price increases may be a calculation measure to maximize profits before exiting, rather than a real effort to restore projects.
This behavior sparked discussions about such action ethics in Defi, where users label teams as “scammers, criminals.”
This event puts other Defi tokens under censorship. Projects such as Beefy Finance (BIFI) that also operate in farming sites on the BNB chain may face similar risks if they cannot adapt to market changes. Similarly, smaller Defi tokens with low liquidity will extend monitoring tags such as Permanent Protocol (PERP), HIFI Finance (HIFI), Leverfi (Leverfi (Lever),… If you cannot innovate or maintain user trust, you may follow the trajectory of an alpaca.
