An executive from a Bitcoin layer-2 project discussed how certain Bitcoin narratives that were previously deemed “overhyped” have now completely disappeared as the ecosystem evolves.
In an interview with Cointelegraph, Charlie Hu, co-founder of Bitlayer, outlined three Bitcoin narratives he considers overinflated. These include those related to Ordinals, layer-2 technologies, and re-staking.
Hu identified non-fungible tokens (NFTs) as one of the overhyped Bitcoin narratives. He stated to Cointelegraph that while NFT inscriptions may have peaked dramatically, that phase is “entirely over.”
Data from CryptoSlam indicates that Bitcoin NFTs generated a volume of $1.4 billion in Q1 2024; however, by Q1 2025, this volume had plummeted to $280 million—a staggering 80% decline. Hu believes the days of Bitcoin NFTs experiencing 1,000x returns are over, and similar “crazy” price movements should not be anticipated any longer.
Are Bitcoin layer-2s losing momentum?
In addition to Bitcoin NFTs, Hu expressed that the excitement surrounding Bitcoin layer-2s and re-staking has also diminished among venture capitalists.
He noted that at the start of 2024, when the layer-2 narrative was robust, there were at least 80 layer-2 networks seeking funding. Many projects shared their visions with investors, media, and various communities, but Hu believes that while there was some initial excitement, it is “definitely over.”
Numerous executives within the crypto space share Hu’s perspective on the waning enthusiasm for layer-2 ecosystems. On February 20, Stacks co-founder Muneeb Ali highlighted that the “honeymoon phase” for Bitcoin layer-2s has concluded, predicting that most projects will fade away as their initial thrill dissipates.
Furthermore, Hu mentioned Bitcoin re-staking as another overhyped narrative, indicating that currently, only two or three projects remain viable following the peak of its hype in 2024.
Despite certain overhyped narratives diminishing, Hu remains optimistic about the Bitcoin ecosystem’s future. He considers layer-2s a vital narrative, viewing them as an engine that can drive Bitcoin’s decentralized finance (DeFi) ecosystem, creating yield opportunities for holders. Hu explained to Cointelegraph:
“Bitcoin layer-2s are providing architecture as a programmable, trust-minimized kind of infrastructure that could provide yield for the Bitcoin whale holders or institutions. That’s a very important narrative. I think we’ll expand more and more with the use cases with adoption.”
Related: Bitcoin volatility hits 3.6% amid heightened market uncertainty
Bitcoin DeFi is still budding
Meanwhile, Dominik Harz, co-founder of the hybrid layer-2 Build on Bitcoin (BOB), told Cointelegraph that Bitcoin layer-2s should be viewed as long-term investments.
“Evaluating Bitcoin Layer-2s with a short-term perspective misses the essence. Hype cycles may fluctuate, but meaningful developments in crypto, such as Bitcoin itself, are fundamentally long-term endeavors,” Harz remarked.
He further asserted that Bitcoin DeFi has not yet realized its full potential. “Bitcoin DeFi hasn’t truly taken off. We’re still in the early stages. Currently, only 0.3% of Bitcoin’s market cap is engaged in DeFi, compared to 30% for Ethereum,” Harz informed Cointelegraph.
This represents a significant 100x disparity, which he argues will diminish swiftly as Bitcoin DeFi expands. He emphasized that layer-2s are essential technological advancements for Bitcoin DeFi to gain traction.
Max Sanchez, chief technology officer of layer-2 protocol Hemi Labs, also contends that Bitcoin layer-2s are not losing momentum.
Sanchez articulated to Cointelegraph that the industry is entering a maturation phase where fundamentals are crucial. He noted that many early Bitcoin layer-2 projects imported technology from Ethereum without tailoring it to Bitcoin’s unique architecture “in a way that genuinely extends Bitcoin.”
Additionally, Sanchez, who is involved with a hybrid project connected to Ethereum, mentioned that developing a layer-2 in isolation and neglecting interoperability with Ethereum-based protocols is a “false notion.”
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