Alpaca Finance Shuts Down After Four Years

Alpaca Finance, a once-gaining attraction DeFi platform for leveraged yield farming, announces its closure after four years, citing financial difficulties and market challenges, impacting users and the broader DeFi ecosystem.

Why Did Alpaca Finance Fail?

On May 26, 2025, Alpaca Finance, a prominent decentralized finance (DeFi) protocol known for its leveraged yield farming on BNB Chain, announced its decision to wind down operations.

The decision came after “extensive internal deliberation” and a thorough evaluation of possible paths forward. The team stated that the decision was made to “safeguard our community and ensure a graceful and secure wind-down.”

But what led to this drastic decision after four years of operation? The reasons are multifaceted, rooted in financial struggles, market dynamics, and strategic missteps.

Alpaca Finance had been grappling with consistent financial losses, a common challenge for DeFi protocols in an increasingly competitive landscape. The platform’s blog post on Medium elaborated that macro factors, such as a shifting DeFi market, declining user engagement, and reduced yields, severely impacted its viability.

Binance’s delisting of the ALPACA token in May 2025 dealt a “major blow” to the project. This delisting limited Alpaca Finance’s ability to attract new users and pursue innovative initiatives, effectively stunting its growth. 

The team also noted in their announcement that the protocol struggled to adapt to evolving market conditions, such as the rise of newer, more efficient DeFi platforms that offered better yields with lower risks.

Beyond external factors, internal challenges played a role. Despite being a fair-launch project with no pre-sale or pre-mine, Alpaca Finance failed to maintain a sustainable tokenomics model. 

Between April and May 2025, Alpaca Finance’s social media account had been largely inactive, with no updates on new developments, partnerships, or efforts to address the community’s concerns. 

DefiLlama data further highlights the protocol’s struggles. Alpaca Finance’s Total Value Locked (TVL) peaked at over $900 million in early 2022 but has since plummeted to $54.6 million as of May 2025, a decline of over 94%. This drastic reduction in TVL reflects a loss of user trust and engagement, as yield farmers moved to more stable or innovative platforms.

The combination of a collapsing token price, low trading volume, and dwindling TVL became a double-edged sword that brought down the project.

The Pump-and-Dump Drama: A Calculated Exit Strategy?

Before its closure, Alpaca Finance experienced a dramatic price surge that caught the crypto community’s attention. 

The ALPACA token skyrocketed by 700% following Binance’s delisting announcement in April 2025, reaching a notable high before its eventual crash. This pump was largely driven by a short squeeze, where traders who had bet against the token were forced to buy back at higher prices, further fueling the rally. 

Read more: ALPACA Token’s Shocking Ride: Short Squeeze, Issuance Freeze, and Looming Delisting

However, this massive pump raised red flags. The price surge occurred despite a lack of fundamental developments, with the project canceling token issuance and burning some tokens to reduce the circulating supply, an artificial attempt to “squeeze” the price upward. As a user sarcastically remarked, “What’s the point of burning tokens if you’re just going to shut down?” 

This sentiment reflects a broader suspicion: the pump may have been orchestrated to allow insiders or large holders to dump their tokens at a profit before the shutdown. 

The subsequent 30% price drop to $0.112 within 24 hours of the closure announcement, with a market cap of $17 million, confirmed the dump. At its all-time high (ATH) of $8.78, ALPACA’s current price represents a staggering 99% decline, leaving retail investors feeling betrayed.

The pump-and-dump pattern suggests a lack of long-term vision. The absence of a clear roadmap post-pump indicates that the price surge was likely a calculated move to maximize profits before exiting, rather than a genuine effort to revive the project.

This behavior has sparked discussions about the ethics of such actions in DeFi, with users labeling the team “scammers, criminals.”

This incident has put other DeFi tokens under scrutiny. Projects like Beefy Finance (BIFI), which also operate in the yield farming space on BNB Chain, may face similar risks if they cannot adapt to market shifts. Similarly, smaller DeFi tokens with low liquidity that Binance extends the Monitoring Tag, such as Perpetual Protocol (PERP), Hifi Finance (HIFI), LeverFi (LEVER),… might follow ALPACA’s trajectory if they fail to innovate or maintain user trust.