As 2025 approaches, industry insiders predict it could become a pivotal year for Bitcoin’s decentralized finance (DeFi) sector. With increasing institutional adoption of Bitcoin and a maturing DeFi ecosystem, the potential for Bitcoin staking alone could reach hundreds of billions of dollars. Currently, Bitcoin staking holds approximately $5.5 billion in total value locked (TVL), and forecasts suggest a market opportunity worth $200 billion.
Matt Hougan, head of research at Bitwise, emphasizes the demand for Bitcoin yield, citing its potential to offer a competitive return even at a 3% yield. Alexei Zamyatin, CEO of Build on Bitcoin, anticipates a significant increase in the overall value locked within Bitcoin DeFi, suggesting it could expand nearly 300-fold. He notes that various users and funds are eager to leverage Bitcoin for yield generation.
The year 2024 saw Bitcoin surpass the $100,000 mark for the first time, fueled by a rush of over $100 billion into spot Bitcoin exchange-traded funds (ETFs). Dean Tribble, CEO of the layer-1 network Agoric, believes this milestone will reignite interest from institutional players and regulators, revitalizing the entire crypto sector in 2025.
Prominent protocols are expected to benefit from this momentum. Notably, Bitcoin’s layer-2 scaling network Babylon and Ethereum’s EigenLayer restaking protocol, which uses Wrapped Bitcoin as collateral, are gaining institutional traction. Both networks currently hold significant TVL, with Babylon at over $5 billion and EigenLayer exceeding $15 billion.
Staking Bitcoin involves using BTC as collateral to secure layer-2 networks in return for rewards, while restaking allows already staked tokens to simultaneously support additional protocols. The potential launch of staked Bitcoin ETFs could further bolster institutional interest, particularly in Europe. While the U.S. remains hesitant, Valour recently launched a Bitcoin-staking ETF offering a 5.65% annual percentage rate in Europe.
The DeFi ecosystem around Bitcoin is also evolving, with liquid staking tokens enabling more sophisticated financial services. Existing layer-2s like RSK, Merlin, and Stacks are already fostering Bitcoin-native DeFi ecosystems with decentralized exchanges, lending platforms, and derivatives protocols.
Jacob Phillips, co-founder of the Bitcoin staking protocol Lombard, foresees Bitcoin evolving as a collateral asset for various DeFi strategies, possibly helping it achieve the status of a global reserve currency. He suggests the Bitcoin staking rate could set a new benchmark for risk-free rates, surpassing U.S. Treasury bill rates and setting a standard for DeFi lending and borrowing.
