Bitcoin NFTs and Layer-2s Struggle to Maintain Momentum

Overhyped Bitcoin Narratives Are Fading

A Bitcoin layer-2 executive explained how some Bitcoin narratives that were once overhyped have now disappeared as the ecosystem continues to develop.

In an interview, Bitlayer co-founder Charlie Hu shared three Bitcoin narratives he believed were overhyped. These included Ordinals, layer-2s, and re-staking.

According to Hu, one of the most overhyped narratives in Bitcoin was non-fungible tokens (NFTs). While Bitcoin inscriptions gained massive popularity, Hu said this trend is now “completely gone.”

Data from CryptoSlam shows that in the first quarter of 2024, Bitcoin NFTs had a trading volume of $1.4 billion. In the first quarter of 2025, the volume dropped to $280 million, marking an 80% decline. Hu believes the days of 1,000x gains in Bitcoin NFTs are over and that people should not expect similar high returns in the future.

Source: X

The Decline of Bitcoin Layer-2s

Hu also highlighted that Bitcoin layer-2s and Bitcoin re-staking have lost their appeal among venture capitalists.

At the start of 2024, at least 80 layer-2 networks were seeking funding when excitement around the concept was strong. Many projects pitched their ideas to investors, media outlets, and different communities. Despite initial hype, Hu believes that excitement has now faded.

Other crypto executives agree with Hu’s assessment. Muneeb Ali, a co-founder of Stacks, declared on February 20 that the "honeymoon phase" of Bitcoin layer-2s was ended. Ali suggested that most projects will disappear as the initial excitement wears off.

Hu also pointed out that Bitcoin re-staking was another overhyped narrative. He said that after its peak in 2024, only two or three projects remain active in space.

Despite the fading hype in some areas, Hu remains optimistic about Bitcoin’s future. He believes layer-2 solutions will play a key role in Bitcoin’s decentralized finance (DeFi) ecosystem, helping Bitcoin holders access yield opportunities.

Source: X

“The architecture provided by Bitcoin layer-2s is programmable and minimizes trust. This could provide yield for Bitcoin whale holders and institutions. That’s a very important narrative. I think we’ll see more adoption and use cases,” Hu said.

The Long-Term View on Bitcoin Layer-2s

Dominik Harz, co-founder of hybrid layer-2 Build on Bitcoin (BOB), believes Bitcoin layer-2s should be viewed as a long-term development rather than a short-term trend.

“Looking at Bitcoin layer-2s through a short-term lens misses the point. Hype cycles come and go, but lasting developments in crypto, like Bitcoin itself, are long-term plays,” Harz said.

Harz also believes Bitcoin DeFi has yet to reach its full potential. “Bitcoin DeFi hasn’t even really taken off yet. We’re very early. Only 0.3% of Bitcoin’s market cap is active in DeFi right now, compared to 30% for Ethereum,” he noted.

Harz pointed out that this is a 100x discrepancy, which he expects to shrink as Bitcoin DeFi grows. He also emphasized that layer-2 solutions are essential for Bitcoin DeFi to expand.

Max Sanchez, chief technology officer of layer-2 protocol Hemi Labs, believes Bitcoin layer-2s are not losing relevance.

He explained that the space is entering a phase where fundamentals matter more than hype. Many early Bitcoin layer-2 projects brought Ethereum-based technology without properly adapting it to Bitcoin’s architecture.

Sanchez also said that building layer-2s in isolation without considering interoperability with Ethereum-based protocols is a flawed approach. He believes that for Bitcoin’s layer-2 ecosystem to grow, projects must connect with broader blockchain networks.

While some Bitcoin narratives may have faded, the evolution of Bitcoin’s layer-2 and DeFi ecosystems suggests there is still plenty of innovation ahead.