The year 2025 is poised to be a pivotal moment for Bitcoin decentralized finance (DeFi) as institutional adoption of Bitcoin accelerates, according to industry executives. The Bitcoin staking market alone has the potential to reach hundreds of billions of dollars, with its current total value locked (TVL) standing at approximately $5.5 billion, as reported by Staking Rewards.
Matt Hougan, head of research at Bitwise, emphasized the robust demand for Bitcoin yield, noting that even a modest 3% yield could be enticing compared to other investment opportunities. Hougan estimates that Bitcoin staking could represent a $200 billion market opportunity. Furthermore, Alexei Zamyatin, co-founder and CEO of Build on Bitcoin, projected an approximate 300-fold increase in Bitcoin DeFi’s TVL.
Institutional interest in Bitcoin surged after its price surpassed $100,000 for the first time in 2024, as investors funneled over $100 billion into Bitcoin exchange-traded funds (ETFs). Dean Tribble, CEO of Agoric, believes that Bitcoin’s all-time high will reignite interest from both institutions and regulators, lifting the entire cryptocurrency sector in 2025.
Babylon, a Bitcoin layer-2 scaling network, and EigenLayer, an Ethereum restaking protocol utilizing Wrapped Bitcoin, are set to attract institutional interest due to their credible technological foundations. As of late December, these platforms possess TVLs exceeding $5 billion and $15 billion, respectively.
Staking Bitcoin, which involves locking BTC as collateral to secure Bitcoin layer-2s for reward generation, is gaining traction. The availability of staked Bitcoin ETFs could further drive institutional attention. Notable developments include asset manager Valour’s Bitcoin-staking ETF in Europe, offering a return of up to 5.65% annual percentage rate, while U.S. regulations still prohibit staking for Bitcoin ETFs.
The DeFi ecosystem is also maturing, with the rise of liquid staking tokens (LSTs) facilitating more complex DeFi applications. Bitcoin-native L2s like RSK, Merlin, and Stacks already support decentralized exchanges, lending protocols, and platforms such as Sovryn, with the latter even venturing into derivatives protocols.
Jacob Phillips, co-founder and head of strategy at Bitcoin staking protocol Lombard, suggests that maturing DeFi strategies could position Bitcoin as the world’s reserve currency. Phillips envisions the Bitcoin staking rate surpassing the U.S. Treasury bill rate, becoming a reference point for DeFi lending.
In summary, 2025 could be transformative for Bitcoin DeFi, driven by institutional adoption and innovative financial strategies, positioning Bitcoin as a central player in the evolving financial landscape.
