Alpaca Finance, a decentralized finance (DeFi) lending protocol operating on the BNB Chain and Fantom, has declared the gradual closure of its platform alongside all associated products. The decision was made public on May 26 after thorough internal deliberation and assessment of future development strategies.

Started without pre-sale, venture capital support, or pre-mining, Alpaca Finance enabled users to access leveraged positions by borrowing from deposit vaults. However, the protocol encountered growing challenges leading up to the announcement of its shutdown.

The team, through an official statement on their Medium blog and their X account, identified ongoing financial difficulties as the primary cause for their decision to cease operations. Despite reaching a peak Total Value Locked (TVL) of over $900 million in early 2022, the TVL has substantially decreased, standing at just $54.6 million in the most recent data.

Alpaca Finance attributed the shrinking TVL and yields to declining revenue, heightened market competition, and saturation, alongside the delisting of the ALPACA token by Binance. Despite a temporary surge in the token's value post-delisting, with a subsequent sharp decrease, the price dropped by 32.1% recently, trading at $0.11 at the time of reporting.

To ensure a smooth and secure exit for users, Alpaca Finance has outlined a structured shutdown plan for all key product lines. This plan involves halting new positions on the original leveraged yield farming platform (AF1.0) in early June, auto-closing outstanding positions by June 30, 2025, putting Alperp in reduce-only mode until its complete shutdown by the end of June, ceasing all Automated Vaults immediately with funds returned to users, disabling borrowing in the AF2.0 Money Market with open positions closing automatically by July 30, 2025, terminating the buyback and burn program while distributing revenue to Governance Vault stakers, and keeping the platform's interface available for asset withdrawals by users until December 31, 2025.