Reflexivity Research: February 2025 in Review

Before diving into February in review, be sure to check out a few recently released reports from our research team:

• Kadena Overview
• Babylon Overview Q1 2025
• Core Overview: BTC Yield for Institutions

Regulatory Developments

Bitcoin Spot ETF Flows – February 2025 Overview

1. Substantial Net Outflows (-$3.55B)

2. Persistent and Widespread Withdrawals

• FBTC (-$1.23B) suffered the largest redemptions.
• IBIT (-$775.8M) faced heavy outflows from mid-to-late February.
• GBTC (-$404.3M) continued its ongoing pattern of outflows.
• ARKB (-$221.1M), BITB (-$217M), and BTC (-$151.8M) all experienced consistent withdrawals.

Most severe redemptions occurred in the final two weeks of February, hinting at broader risk-aversion and potential portfolio rebalancing.

3. Heightened Selling Pressure in Late February

• 24th Feb (-$539M): Major redemptions across multiple ETFs.
• 25th Feb (-$1.14B): The month’s worst day, led by FBTC (-$344.7M), IBIT (-$164.4M), and ARKB (-$126.2M).
• 26th Feb (-$754.6M): Continued outflows, with IBIT (-$418.1M) seeing its largest single-day drop.
• 27th Feb (-$275.9M): Selling pressure persisted, though at a reduced pace.

4. Limited Inflows and Momentary Recoveries

• 4th Feb (+$340.7M): A robust early-month inflow, attributed mainly to IBIT (+$249M) and ARKB (+$56.1M).
• 28th Feb (+$193.7M): BTCW posted notable inflows, the only ETF to stage a late-month rebound.

Conclusion

Bitcoin ETFs faced severe net outflows of $3.55B, reflecting reduced investor confidence compared to Ethereum ETFs, which remained positive. While BTCW showed some resilience at month-end, most funds suffered significant redemptions, particularly FBTC and IBIT. The data suggests sustained selling pressure.

Ethereum Spot ETF Flows – February 2025 Overview

Net Inflows ($60M)

Significant Inflows

• 4th Feb: The highest single-day inflow of $307.8M, driven mainly by ETHA ($276.2M).
• 3rd Feb: Another substantial inflow of $83.6M, led by FETH ($49.7M) and ETHE ($15.9M).

Heavy Outflows & Sell-Offs

• 24th Feb (-$78M): The largest single-day outflow, with major withdrawals from ETHA (-$48.2M), CETH (-$9.7M), and ETHE (-$15.4M).
• 26th Feb (-$50.1M): Further outflows from ETHA (-$69.8M), FETH (-$18.4M), and CETH (-$2.8M), partially offset by minor inflows.
• 27th & 28th Feb: Consecutive outflow days totalling $71.2M and $41.9M, driven mainly by ETHA and FETH.

Volatility in Specific ETFs

• ETHA saw the most extreme moves: a $276.2M inflow on 4th Feb, followed by significant outflows from the 24th to 28th.
• FETH ended the month with a net $72.8M inflow, balancing early gains against mid-month redemptions.
• CETH and ETHE generally had negative flows, with ETHE posting the largest net outflow at -140.7M.

Minimal Impact from Grayscale ETH

• Grayscale ETH ETF contributed a modest $11M over the month, with no pronounced daily swings.

Major Launches in February 2025

Beyond Etf Flows, February 2025 included several notable mainnet and token launches in the industry. Major DeFi and Web3 projects introduced new blockchains and tokens that attracted community interest, trading activity, and capital inflows. This section examines four launches: Unichain, Story Protocol, Berachain, and Kaito while focusing on their features, early adoption metrics, community reception, and broader market impact.

Unichain Mainnet Launch – Uniswap’s DeFi-Focused L2

Unichain, a new Ethereum Layer-2 network from Uniswap Labs, went live on 11 February 2025. Developed using the OP Stack, it is designed as a high-performance, interoperable rollup intended for decentralized finance. Offering 1-second blocks and roughly 95% lower gas costs than Ethereum L1, Unichain aims to serve as a primary destination for cross-chain liquidity. It launched as a Stage 1 optimistic rollup with permissionless fault proofs active from the start, providing a higher level of trustlessness than many emerging L2s. It also integrates with Optimism’s Superchain ecosystem for streamlined cross-chain interoperability, with the goal of single-block message passing among OP Stack chains in the future.

In its testnet phase, Unichain processed over 95 million transactions and 14.7 million smart contracts within four months, suggesting strong developer participation. Nearly 100 projects and protocols (including Uniswap v4, Circle’s USDC, Coinbase, and Lido) were live at launch or planned to join soon, offering a broad DeFi app ecosystem on day one. Uniswap’s own apps (Uniswap v2/v3/v4 and the Uniswap wallet) were immediately available, so users could bridge funds, trade, and provide liquidity using familiar tools. Technical improvements (in collaboration with Flashbots) include a Trusted Execution Environment designed to optimize MEV capture, with plans for TEE-based block building aimed at 250ms block times.

Many in the community responded favourably, as Unichain’s structure aims to reduce fees and speed up transactions without requiring Ethereum L1 costs. Its fee model channels a portion of revenue back to the Uniswap ecosystem, potentially increasing the value of UNI tokens. Some analysts estimated that if Uniswap’s current trading volumes move to Unichain, the chain could generate around $500 million in annual fees that would otherwise go to Ethereum validators. Approximately 20% of Unichain’s fee revenue goes to Uniswap Labs, 65% to the Unichain Validation Network (UVN), and 15% to the Optimism Collective. This approach has been viewed as a sustainable funding model that also benefits the wider community.

Nonetheless, questions arose about the need for another L2 in an already crowded space. Hayden Adams, Uniswap’s founder, argued that many L2s will specialize in different areas, and Unichain is intended for trading and liquidity use cases. Analysts noted that users may take time to migrate liquidity, since established pools on Ethereum and other L2s already benefit from deep liquidity. Overall, the Unichain mainnet launch marks Uniswap’s expansion from decentralized exchange to blockchain operator, offering new possibilities for scalability and revenue but also facing the challenge of attracting an existing user base to a new network.

Story Protocol Mainnet – Blockchain for Intellectual Property (IP)

Another coveted launch came from Story Protocol when it launched its public mainnet, called “Homer,” on 13 February 2025, introducing a Layer-1 blockchain network dedicated to intellectual property (IP) rights. Backed by significant funding, Story Protocol presents itself as a decentralized platform for creators to register content, tokenize rights, and enforce licensing agreements on-chain. Alongside the network, Story released its native token, $IP (sometimes styled as ꧁IP꧂), which powers the ecosystem’s transactions and governance. The token is used for fees on the Story network and provides voting power, aligning incentives for both IP creators and users.

Features and Early Use Cases

Story Protocol’s central premise is making intellectual property programmable. Creators can register their work on-chain and embed usage terms (such as licences and royalty splits) that automatically execute through smart contracts. This setup allows content to be openly discovered and legally reused or remixed by others, with built-in payments to the original creator. Network features include automatic licensing and revenue-sharing agreements: if someone wishes to use a piece of art, music, or any registered IP, they can do so by paying a fee defined on-chain, which the creator can receive in crypto or convert to local currency. By recording IP metadata and usage on an immutable ledger, Story Protocol aims to track how content is used across the web and ensure creators are compensated when their work is leveraged.

This approach is especially relevant as generative AI models increasingly rely on large volumes of data for training. Through Story Protocol, a creator could register content and license it to AI developers via on-chain agreements, turning what might otherwise be uncompensated data scraping into a new revenue stream. An experimental on-chain AI agent framework (ACTP/IP) introduced at launch enables AI agents to interact directly with the Story blockchain, including automated data licensing and payments. This integration positions Story Protocol at the intersection of AI and Web3, where machine agents could autonomously license content from the blockchain.

Story Protocol’s initial adoption efforts centred on digital art and creator communities. More than 50 applications were integrated at launch, including a popular collaborative art platform with millions of users. These integrations suggest that some existing creator platforms see value in on-chain IP registration. For instance, an artist might register a drawing through Story Protocol and specify terms for its reuse; the platform’s integration could make the process seamless for users without blockchain experience. In addition, Story ran an early contributor programme that included Genesis NFTs, which may grant certain airdrop or participation rewards, as part of its community-building efforts.

Community and Creator Economy Reactions

Within the Web3 creator community, there was optimism that Story Protocol could protect and monetize creative work. The $IP token’s debut garnered substantial trading interest and was listed on several major exchanges. In its first days, the token’s price climbed above $6, rising from its initial listing price amid speculation about future growth. This early momentum appeared driven by a combination of enthusiasm for the project’s concept and broader market appetite for new tokens with established backers. Many NFT artists praised Story’s effort to create an “IP rights layer” for Web3, noting the enormous scale of the global IP market.

Still, some observers questioned how effectively an on-chain protocol can protect IP in off-chain jurisdictions. Registering IP with Story Protocol does not automatically confer formal legal trademarks or copyrights, serving instead as a public record and licensing mechanism. In practice, real-world legal systems may need to recognize or integrate with these on-chain registrations, which remains an emerging area. The project’s tokenomics also drew attention. A significant portion of the total supply was unlocked at mainnet launch, and the majority of tokens were allocated to community and ecosystem funds. Although this was framed as a way to provide liquidity for the ecosystem, it prompted concerns about potential sell pressure. The main governance discussion centred on how $IP token voting could shape platform rules, including how to handle copyright disputes or takedown requests.

Overall, Story Protocol’s mainnet release underscored a growing trend in February 2025: the convergence of blockchain with the creator economy and AI-driven data monetization. By providing creators with a means to tokenize and manage their IP, Story aligns with shifting market demand and appears to have gained support from both investors and the creator community.

Berachain Mainnet and $BERA Airdrop – DeFi’s New “Proof-of-Liquidity” L1

Berachain, perhaps one of the most highly anticipated Layer-1 blockchain projects, launched its mainnet on 6 February 2025 alongside one of the largest crypto airdrops to date (valued at roughly $632 million) of its native token, $BERA. Berachain describes itself as a “proof-of-liquidity” chain, in which providing liquidity and staking help secure the network, effectively turning liquidity into security. It is EVM-compatible, enabling Ethereum-native dApps and smart contracts, but introduces distinctive tokenomics and validator incentives intended to attract DeFi capital. The project fostered a meme-focused community (featuring a sunglass-wearing bear mascot nicknamed “Smokey the Bera”) during its extended testnet phase, leading to considerable anticipation for its mainnet launch.

Airdrop Details and Token Launch

On 5 February, the Berachain Foundation outlined how the $BERA token airdrop would be allocated to early supporters and the schedule for claiming tokens. A total of 500 million BERA were minted at genesis, with 15.8% (about 79 million tokens) designated for the airdrop. In the lead-up to launch, futures markets priced BERA around $8, giving the airdrop a combined valuation of around $632 million. Those eligible included participants in Berachain’s testnet and governance forums, as well as holders of specific NFTs, such as the Bong Bears collection, who received the largest share. Some allocation was also reserved for social media campaign participants, who were subject to a slightly later claim date to reduce immediate selling pressure.

The $BERA token functions both as the gas token for network transactions and the staking token for validators. In addition to the initial 15.8% airdrop allocation, another 13.1% of supply was set aside for future community initiatives, while 20% was reserved for ecosystem development. Although Berachain has cultivated a grassroots public image, 34.3% of tokens have been allocated to investors and 16.8% to the core team and advisors (these remain locked and vesting). Two months after launch, Berachain secured a sizeable Series B funding round, signalling major interest in the project beyond the initial mainnet release.

Initial Adoption and DeFi Impact

Berachain’s launch generated significant user activity and capital flows, making it a key DeFi event in early 2025. Within the first day, tens of thousands of users claimed the airdrop, and several major exchanges immediately listed BERA for trading, providing high liquidity from the outset. The price initially remained in the $8 range, in line with pre-launch futures, while the circulating supply at launch totalled around 107.5 million tokens (21.5% of the total).

The chain’s Total Value Locked (TVL) soared into the billions within weeks, as yield farmers and liquidity providers hurried to take advantage of high APYs offered by Berachain’s DeFi protocols. By late February, Berachain’s TVL reached approximately $3.27 billion, surpassing several longer-standing networks. Most of this value was concentrated in a few native decentralised apps, such as a liquid staking platform, a popular DEX, and a yield farm, each attracting more than a billion dollars’ worth of assets. Many users bridged ETH and stablecoins to Berachain to gain rewards, including potential distributions of BERA for providing liquidity.

Berachain’s proof-of-liquidity design appears to have encouraged this rapid inflow of capital. By allowing users who provide liquidity to stake a derivative to validate the network, the chain redirects part of its revenue back to the community. This approach incentivizes participants to keep liquidity on the platform rather than remove it, helping establish a deep base of staked assets. Analysts see Berachain’s quick rise as an example of renewed enthusiasm in DeFi, driven by a novel consensus mechanism and sizable yield opportunities.

Community Buzz and Concerns

The Berachain community celebrated the mainnet launch as the conclusion of a long-running, meme-heavy journey. Although the large airdrop was widely welcomed, some controversy arose over the allocations. Testnet users, who spent considerable effort testing the network, received around 1.65% of the total supply, while NFT holders (particularly Bong Bears) secured 6.9%. Certain community members argued that more credit should have gone to testnet participants, but the Berachain team explained that the NFT holders had shown their early support in other ways.

No major security incidents surfaced in the immediate aftermath. The network successfully handled the large volume of on-chain transactions and new dApps, though some regulatory limitations prevented certain user groups from trading BERA on specific exchanges. Nonetheless, Berachain’s successful mainnet and monumental airdrop illustrate several ongoing trends in early 2025: the effectiveness of substantial airdrops as a user acquisition tool, the appeal of new DeFi opportunities amid a market upswing, and the capacity for new Layer-1s to make a significant impact. By month’s end, Berachain had secured its position as a notable DeFi hub, with a dedicated community pledging their allegiance to the “Bera nation.”

Kaito Token Launch on Base – Social Analytics Meets Web3

On 20 February 2025, the long-awaited launch of the Kaito (KAITO) token took place on Coinbase’s Base network, complete with an airdrop and immediate exchange listings. Kaito is an AI-driven crypto information platform that had previously operated without a token. The new KAITO token was introduced to decentralize its ecosystem and reward a community of content curators, known as “Yappers.” Its debut featured an unusual airdrop campaign aimed at social media influencers and active contributors, as well as notable price volatility and high trading volumes.

Airdrop Mechanics (“Yaps” and NFTs)

Kaito’s airdrop centred on a campaign called Kaito Yaps, which began in late 2024. Participants connected their Twitter (X) accounts and engaged with the platform, earning “Yap” points for contributions and discussions about crypto. These Yap points later converted into allocations of KAITO tokens, so top-ranking influencers on the Yap leaderboard received notably large tranches. Kaito also issued Genesis NFTs to early supporters, providing an additional path to token allocations. This approach deliberately targeted power users and influencers to spark network effects, hoping their involvement would amplify the token’s visibility.

When the airdrop began on 20 February, recipients were required to pay a small claim fee (approximately $4 in ETH) to receive their tokens. Despite some grumbling over the fee, around 30,000 unique addresses claimed KAITO on day one, with many smaller holders likely regular users who tested Kaito’s product.

Exchange Listings and Trading Performance

KAITO’s listing trajectory was uncommonly swift for a new altcoin. Binance, Kraken, OKX, KuCoin, and other major exchanges listed it around launch, bolstering liquidity. Binance featured KAITO in its promotional airdrop to BNB holders and opened spot trading with multiple pairs, including BTC, USDT, and BNB. Perpetual futures trading became available at the same time, allowing leveraged positions from day one.

Price activity was turbulent. KAITO dropped to roughly $0.90 on launch day, as many airdrop claimants cashed out, then rallied to a high of $2.03 by the following day amid heavy speculation and possible short squeezes in the futures market. By 25 February, the token settled near $1.80, giving it a circulating market cap of around $432 million (with 241 million tokens in circulation out of a total supply of 1 billion). Trading volumes exceeded $1 billion in the first week, reflecting both intense interest and significant turnover.

Influencers, Selling Pressure, and Community Reaction

While KAITO benefitted from enthusiasm around AI-related tokens, the launch also raised questions about the influence-focused distribution. Because the airdrop heavily rewarded high-profile crypto personalities, many of them sold large quantities of KAITO soon after claiming. This led to downward price pressure, although market demand pushed the token back above $1 by the end of launch day.

Kaito’s team acknowledged that some KOLs (Key Opinion Leaders) would likely sell immediately, but they viewed the distribution’s primary goal as spreading the token widely and generating publicity. Rumours had circulated about high potential payouts per Yap point, which caused some disappointment among recipients once real figures emerged. However, the project introduced post-launch staking to encourage holding, offering additional rewards and badges to longer-term participants.

From a technical standpoint, the Base network handled the airdrop smoothly, with most trading volume taking place on centralized exchanges. Liquidity on Base’s decentralized exchanges was relatively low, so early on-chain trading had minimal impact on overall price discovery.

Summary

The Kaito token launch demonstrated the ongoing popularity of large community airdrops and the market’s appetite for AI-linked crypto projects. Its rapid move to top-tier exchanges, billion-dollar trading volumes, and immediate futures availability reflect strong interest in “AI + crypto” concepts. Yet the heavy influencer-driven distribution sparked mixed reactions. On one side, it delivered major allocations to leading crypto figures, amplifying Kaito’s reach; on the other, many of these recipients sold quickly, suggesting that not all attention-based token models foster enduring loyalty. By the end of February, KAITO was trading in a relatively stable range near $1.50–$2.00, as traders and community members evaluated its longer-term prospects in powering an AI-driven research platform for the Web3 space.

Conclusion

Overall, February 2025 underscored the industry’s ability to adapt and evolve amidst regulatory pivots, security challenges, and shifting investor priorities. Despite notable setbacks, such as record-breaking hacks and substantial outflows from Bitcoin ETFs, the industry showcased resilience through new Layer-1 launches, DeFi innovations, and creator-focused platforms. As projects like Unichain, Story Protocol, Berachain, and Kaito gained traction, they provided fresh avenues for adoption and capital inflows, offering a glimpse of Web3’s potential to reshape finance, intellectual property rights, and data-driven research.

Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.