As the year comes to a close, industry executives are predicting that Bitcoin-native decentralized finance (DeFi) will be among the hottest themes in 2025. With institutional adoption of Bitcoin accelerating and its DeFi ecosystem maturing, several key players shared their insights with Cointelegraph.
The Growth Potential for BTC Staking is Strong
Two industry executives highlighted the growth potential for Bitcoin staking, estimating that it represents a total addressable market in the hundreds of billions of dollars. As of December 30th, Bitcoin staking commands roughly $5.5 billion in TVL (Total Value Locked) according to Staking Rewards.
Matt Hougan, Bitwise’s Head of Research, told Cointelegraph:
"Everything aligns for Bitcoin staking being a significant market. There’s a lot of demand for Bitcoin yield. Even if you’re getting a 3% yield, it’s attractive compared to other options."
Hougan estimates that Bitcoin staking represents a $200 billion market opportunity.
The Potential for Bitcoin DeFi’s TVL to Increase by Approximately 300x
Alexei Zamyatin, Co-founder and CEO of Build on Bitcoin, shared similar sentiments with Cointelegraph:
"We have spoken with dozens and dozens of large Bitcoin DeFi users and funds keen to put their Bitcoin holdings to work earning yield."
Zamyatin estimates that Bitcoin DeFi’s total value locked (TVL) could increase by approximately 300x.
Institutional Adoption of Bitcoin in 2024
In 2024, Bitcoin surpassed $100,000 per coin for the first time as investors poured more than $100 billion into spot BTC exchange-traded funds (ETFs). Dean Tribble, CEO of layer-1 network Agoric, shared his thoughts on the matter:
"Bitcoin’s all-time high will spark renewed interest in crypto from institutions and regulators alike and should reinvigorate the entire crypto sector in 2025."
Some protocols are particularly well-positioned to benefit. Babylon, a Bitcoin layer-2 (L2) scaling network, and EigenLayer, a restaking protocol on Ethereum taking Wrapped Bitcoin as collateral, are seen as legitimate by institutions.
Staking Bitcoin Involves Locking BTC as Collateral
Hougan explained that staking Bitcoin involves locking BTC as collateral to secure Bitcoin L2s in exchange for rewards. Restaking involves taking a token that has already been staked and using it to secure other protocols simultaneously.
The Role of Staked BTC ETFs in 2025
Hougan also shared his thoughts on the potential role of staked BTC ETFs in 2025:
"Whether [staked BTC] makes it into an ETF structure in the United States, I’m not sure, but in Europe, definitely."
The Maturing DeFi Ecosystem
Liquid staking tokens (LSTs) representing claims on staked BTC are proliferating, enabling more complex DeFi use cases. As of December 30th, Bitcoin LSTs command upward of $2.5 billion in total TVL according to Staking Rewards.
Some Bitcoin L2s — including RSK, Merlin and Stacks — already host Bitcoin-native DeFi ecosystems, including decentralized exchanges, lending protocols and all-in-one platforms such as Sovryn.
Novel DeFi Strategies Will Emerge
Jacob Phillips, co-founder and head of strategy at Bitcoin staking protocol Lombard, shared his thoughts on the matter:
"Novel DeFi strategies will emerge across the risk curve with Bitcoin as a collateral asset, from simple buy-and-hold strategies with yield-bearing Bitcoin assets to basis trades and options strategies."
Phillips foresees Bitcoin’s maturing DeFi ecosystem eventually helping cement its status as the world’s reserve currency.
The Bitcoin Staking Rate Will Become the ‘Risk-Free Rate’
Phillips also shared his thoughts on the potential future of Bitcoin staking:
"The Bitcoin staking rate will become the ‘risk-free rate,’ flipping the US Treasury bill rate and becoming a benchmark for DeFi lending and borrowing."
Conclusion
As we look towards 2025, it’s clear that Bitcoin-native decentralized finance (DeFi) is set to dominate. With institutional adoption accelerating and its DeFi ecosystem maturing, several key players are predicting strong growth potential for BTC staking and the potential for novel DeFi strategies to emerge.
Sources:
- DefiLlama
- Staking Rewards
- Valour
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