Will 2025 Potentially Mark the Year for Widespread Adoption of Bitcoin in Decentralized Finance (DeFi) Applications
As institutional Bitcoin adoption accelerates and its DeFi ecosystem matures, several industry executives predict that Bitcoin-native decentralized finance (DeFi) will be one of the hottest themes in 2025.
Growth Potential for BTC Staking
The growth potential for BTC staking is especially strong, with a total addressable market in the hundreds of billions of dollars. Two industry executives estimate that Bitcoin staking represents a $200 billion market opportunity. The current total value locked (TVL) in Bitcoin staking commands roughly $5.5 billion, according to Staking Rewards.
"As everything aligns for Bitcoin staking being a significant market," said Matt Hougan, Bitwise’s head of research, "there’s a lot of demand for Bitcoin yield." Even with a 3% yield, it’s attractive compared to other options. Hougan estimates that Bitcoin staking represents a $200 billion market opportunity.
Institutional Adoption
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). This milestone has sparked renewed interest in crypto from institutions and regulators alike and should reinvigorate the entire crypto sector in 2025.
"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," said Dean Tribble, CEO of layer-1 network Agoric. Some protocols are particularly well-positioned to benefit, including Babylon, a Bitcoin layer-2 (L2) scaling network, and EigenLayer, a restaking protocol on Ethereum taking Wrapped Bitcoin (WBTC) as collateral.
Maturing DeFi Ecosystem
The maturing DeFi ecosystem will enable more complex use cases. Liquid staking tokens (LSTs) representing claims on staked BTC are proliferating, with some Bitcoin L2s already hosting Bitcoin-native DeFi ecosystems. These include decentralized exchanges, lending protocols, and all-in-one platforms such as Sovryn.
As Jacob Phillips, co-founder and head of strategy at Lombard, a Bitcoin staking protocol, noted: "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."
Potential for Staked BTC ETFs
Staked BTC ETFs could catalyze institutional interest in 2025. In November, asset manager Valour launched a Bitcoin-staking ETF in Europe. It stakes to Core, a Bitcoin L2, and pays upward of 5.65% APR as of Dec. 30, according to Valour’s website.
Key Players
Some key players are positioning themselves for success in the burgeoning BTC staking market. These include:
- Babylon: A Bitcoin layer-2 (L2) scaling network with a TVL exceeding $5 billion.
- EigenLayer: A restaking protocol on Ethereum taking Wrapped Bitcoin (WBTC) as collateral, with a TVL exceeding $15 billion.
- Valour: An asset manager that launched a Bitcoin-staking ETF in Europe.
Conclusion
As institutional adoption accelerates and the DeFi ecosystem matures, Bitcoin-native decentralized finance is poised to be one of the hottest themes in 2025. The growth potential for BTC staking is especially strong, with a total addressable market in the hundreds of billions of dollars. With key players positioning themselves for success and novel DeFi strategies emerging across the risk curve, it’s an exciting time for Bitcoin enthusiasts.
