DeFi’s $12B Liquidity Dilemma: Aqua Seeks to Transform Dormant Funds into Active Power

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DeFi’s $12B Liquidity Dilemma: Aqua Seeks to Transform Dormant Funds into Active Power

Bitget-RWA2025/11/22 16:26

By:Bitget-RWA

- DeFi faces $12B liquidity crisis with 95% capital idle due to blockchain fragmentation. - 1inch's Aqua protocol enables shared liquidity, turning wallets into self-custodial AMMs to boost capital efficiency. - Aqua's $100K bug bounties and SDK aim to refine infrastructure as DeFi borrowing hits $41B in Q3 2025. - Critics highlight DeFi's fragmentation barriers, but proponents see Aqua replicating 2019 aggregation success. - 1INCH token's $0.207 breakout could signal optimism about resolving the liquidity

Recent industry research reveals that decentralized finance (DeFi) is grappling with a $12 billion liquidity shortfall, with 95% of funds remaining unused due to fragmentation among various protocols and blockchains. This challenge has driven new developments, such as 1inch's introduction of Aqua—a shared liquidity protocol designed to transform capital deployment in DeFi. The platform's co-founder Anton Bukov

characterized Aqua as a way

to significantly increase capital effectiveness by letting several strategies tap into the same tokens without locking up assets.

Launched in November 2025, Aqua provides developers with access to a unified liquidity layer through an early-access SDK, libraries, and guides

according to the official statement

. Unlike conventional systems that require users to divide or lock their assets in specific pools,

Aqua enables each wallet to function as a self-custodial AMM

, allowing multiple strategies to be executed at once. This innovation removes the need for liquidity providers to pick between competing pools,

lowering opportunity costs and enhancing capital utilization

. The protocol also offers bug bounty incentives of up to $100,000 to encourage developers to improve its framework

as noted by BeInCrypto

The necessity for such advancements is highlighted by the unprecedented leverage in DeFi.

Galaxy Digital shared that crypto-backed borrowing jumped

to $73.6 billion in the third quarter of 2025, with DeFi lending alone reaching $41 billion. On-chain lending now makes up 66.9% of all crypto borrowing, fueled by incentives and new chains like Plasma. Yet, this expansion brings risks,

as shown by a $21.68 million liquidation incident

on November 22, when a major DeFi participant lost 700

WBTC

following a

Bitcoin

price drop.

Investors are monitoring the 1inch token (1INCH) as an indicator of sector sentiment.

The token held steady around $0.187

at the end of November, with blockchain data pointing to increased whale transactions and favorable funding rates. Experts observed that if

1INCH

surpasses $0.207, it may aim for $0.234, reflecting growing optimism about Aqua’s ability to solve liquidity issues

as predicted by analysts

While critics maintain that DeFi’s fragmented landscape still hinders widespread adoption, supporters such as 1inch co-founder Sergej Kunz argue

Aqua has the potential to mirror the success

of the platform’s 2019 aggregation protocol. By deepening liquidity across different projects, even smaller protocols could handle larger trades, promoting a more unified DeFi environment

as previously highlighted

The sector’s current phase marks a pivotal moment: as leverage and borrowing hit new highs, solutions like Aqua seek to activate dormant capital. The future of DeFi may depend on whether shared liquidity frameworks can resolve the industry’s liquidity dilemma or if it will continue to struggle with underused assets.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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