The Virtuals protocol is struggling as revenue and token value tend to decline. Once a leader in AI-driven blockchain, it now faces investor confidence in decline and decline in user activity. Market shifts require real utility for hype, forcing virtual adaptation or risk to disappear.
Income crash and token crash
According to Dune Analytics, the daily transaction revenue of the Virtuals protocol fell sharply, from $1.02 million in January to $34,792 at the end of February. This steep decline highlights the dramatic losses of user engagement and trading activities in the ecosystem. Meanwhile, virtual tokens suffered a huge price crash, losing 35.2% of their value in the past week alone. Currently, the token is trading below 88.8% of its all-time high of $5.07, raising concerns about its long-term sustainability and investor confidence.
Source: Dune.com
Market analysts identified several factors behind this downturn, including a shrinking liquidity, an oversupply of tokens and a lack of real-world utilities in the virtual protocol ecosystem. Dominick John, a senior researcher at Kronos Research, stressed that investors have lost patience with blockchain projects that cannot provide tangible value. As interest in the AI sector declines, speculative enthusiasm is vanishing. Only projects with strong foundations and clear use cases can survive. There is no significant change in strategy, and virtual protocols may lose their competitive advantage in a rapidly growing market.
AI agent hype disappears, adoption declines
Source: Coingecko
Once a major trend in cryptocurrencies, the AI agent sector is now witnessing a sharp decline in adoption. On the Virtuals protocol, new AI proxy creation has dropped from 1,300 peaks in November to less than 10 per day in February. This decline indicates a huge shift in user interest and engagement.
Additionally, active wallet transactions on the platform have dropped from 181,000 to 7,642, reflecting a significant reduction in overall activity. Cheqd CEO Fraser Edward pointed out that the AI agent market is entering the merger phase, in which only projects with practical applications and strong adoption will remain relevant.
“The hype cycle is over, and from this point on, only high-quality utility-driven solutions can stand the test of time.” – Fraser Edward – CEO of Cheqd.
This used to be a highly search keyword and is expected to bring liquidity and bullish waves back to the crypto market in 2025. Bitcoin prices have fallen over the past few weeks, and the lack of liquidity has inadvertently led to users losing interest in AI agents. The reason for this problem may be partly due to a lack of liquidity and profit on virtually, or maybe the AI proxy tag isn’t as hot as it used to be.
Learn more: What is an encrypted AI proxy? The top 8 AI proxy tokens 2025
Ways to revival of virtual protocols
Despite these challenges, virtual protocols still have some advantages. Dan Smith of Blockworks Research noted that the project maintained a $12.1 million financial buffer in CBBTC, which could help stabilize operations in the near term. But as the market value shrinks from $1.9 billion to just $360 million, virtual people must take decisive actions to regain investor confidence.
Source: And Smith
Summary
The next few months will be crucial for virtual protocols. To recover, the team must prioritize sustainability, establish strategic partnerships and provide users with real-world value. Without timely changes, virtual people may gradually disappear like many other failed AI-driven blockchain projects.
