Bitcoin's native DeFi is expected to be one of the hottest topics in 2025 as institutional approval for Bitcoin (BTC) accelerates, along with a more mature DeFi ecosystem, according to many industry leaders sharing with TinTucBitcoin.
The growth potential of BTC staking is particularly strong, with a market that could be regulated in the hundreds of billions of USD, the two leaders stated. As of December 30, Bitcoin staking held about 5.5 billion USD in total value locked (TVL), according to data from Staking Rewards.
"Everything is in favor of Bitcoin staking becoming an important market," Matt Hougan, head of research at Bitwise, shared with TinTucBitcoin.
"There is a lot of demand for Bitcoin yields," Hougan added. "Even if it only achieves a yield of 3%, it is still an attractive option compared to others."
Hougan estimates that Bitcoin staking represents a market opportunity worth 200 billion USD. The total value locked in Bitcoin DeFi could increase by about 300 times, Alexei Zamyatin, co-founder and CEO of Build on Bitcoin, revealed to TinTucBitcoin.
"We have spoken to dozens of large funds and Bitcoin DeFi users eager to put their Bitcoin holdings to work for profit," Zamyatin said.
Approval from institutions
In 2024, Bitcoin will first surpass the milestone of 100 thousand USD per coin as investors pour over 100 billion USD into the Bitcoin spot ETF.
"Bitcoin's all-time high will reignite interest in cryptocurrencies from both institutions and regulators and should revive the entire crypto industry in 2025," Dean Tribble, CEO of layer-1 network Agoric, shared with TinTucBitcoin.
Some protocols are particularly well-positioned to benefit. Babylon, a layer-2 scaling network for Bitcoin, and EigenLayer, a restaking protocol on Ethereum using Wrapped Bitcoin (WBTC) as collateral, are seen as reasonable by institutions, Hougan stated.
"This technology seems reasonable, even from a high-level perspective," Hougan remarked.
As of December 30, the TVL of Babylon and EigenLayer exceeded 5 billion USD and 15 billion USD, respectively, according to data from DefiLlama.
Bitcoin staking involves locking BTC as collateral to secure Bitcoin's layer-2 solutions in exchange for rewards. Restaking involves taking a staked token and using it to simultaneously secure other protocols.
Additionally, BTC staking ETFs could catalyze institutional interest by 2025, Hougan said.
In November, asset manager Valour launched a Bitcoin staking ETF in Europe. It stakes into Core, a layer-2 of Bitcoin, and pays over 5.65% annual interest as of December 30, according to Valour's website. Currently, staking is not yet permitted for Bitcoin ETFs in the U.S.
"I'm not sure if [BTC staking] will be accepted in the ETF structure in the U.S., but in Europe, definitely," Hougan said.
Mature DeFi ecosystem
Liquid staking tokens (LSTs) represent claims on BTC staking that are developing, allowing for the construction of more complex DeFi use cases. As of December 30, Bitcoin's LSTs held over 2.5 billion USD in total TVL, according to Staking Rewards.
Several layer-2 solutions of Bitcoin — including RSK, Merlin, and Stacks — have their own Bitcoin native DeFi ecosystems, including decentralized exchanges, lending protocols, and aggregation platforms like Sovryn. Merlin even has a native Bitcoin derivatives protocol, Surf.
In the near future, "novel DeFi strategies will emerge across the risk spectrum with Bitcoin as collateral, from simple buy-and-hold strategies with yield-bearing Bitcoin assets to base trades and options strategies," Jacob Phillips, co-founder and head of strategy at the Bitcoin staking protocol Lombard, told TinTucBitcoin.
Phillips predicts that the mature DeFi ecosystem of Bitcoin will ultimately help solidify its position as the world's reserve currency.
"The Bitcoin staking rate will become the 'risk-free rate', overshadowing the U.S. Treasury bond rate and becoming a standard for lending and borrowing in DeFi," Phillips stated.
