As the world of cryptocurrency continues to evolve, Bitcoin-native decentralized finance (DeFi) is poised to become one of the hottest themes in 2025. With institutional adoption accelerating and its DeFi ecosystem maturing, several industry executives have shared their insights with Cointelegraph on the growth potential of Bitcoin staking.
A Growing Market Opportunity
According to Matt Hougan, Bitwise’s head of research, the total addressable market for BTC staking is in the hundreds of billions of dollars. As of December 30, Bitcoin staking commands roughly $5.5 billion in TVL (Total Value Locked), according to Staking Rewards.
"’Everything aligns for Bitcoin staking being a significant market,’ Hougan told Cointelegraph. ‘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 Rise of Institutional Adoption
Institutional adoption is a key driver of the growth in Bitcoin DeFi. 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).
"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," Dean Tribble, CEO of layer-1 network Agoric, told Cointelegraph.
Protocols Poised for Growth
Some protocols are particularly well-positioned to benefit from the growth in Bitcoin DeFi. Babylon, a Bitcoin layer-2 (L2) scaling network, and EigenLayer, a restaking protocol on Ethereum taking Wrapped Bitcoin (WBTC) as collateral, are seen as legitimate by institutions.
"The tech seems reasonable, even from a high-level perspective," Hougan noted.
As of December 30, Babylon’s and Eigenlayer’s TVLs exceed $5 billion and $15 billion, respectively, according to data from DefiLlama.
Staking Bitcoin: A Growing Market
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.
Additionally, staked BTC ETFs could catalyze institutional interest in 2025, Hougan said.
"In November, asset manager Valour launched a Bitcoin-staking ETF in Europe," Hougan noted. "It stakes to Core, a Bitcoin L2, and pays upward of 5.65% APR as of December 30."
Staking is not yet permitted for Bitcoin ETFs in the United States.
Maturing DeFi Ecosystem
Liquid staking tokens (LSTs) representing claims on staked BTC are proliferating, enabling more complex DeFi use cases. As of December 30, 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.
Merlin even touts a Bitcoin-native derivatives protocol, Surf.
The Future of Bitcoin DeFi
As the market continues to mature, 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, the possibilities are endless.
"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," Jacob Phillips, co-founder and head of strategy at Bitcoin staking protocol Lombard, told Cointelegraph.
Phillips foresees Bitcoin’s maturing DeFi ecosystem eventually helping cement its status as the world’s reserve currency.
Conclusion
As we look to 2025, it is clear that Bitcoin-native decentralized finance (DeFi) will be one of the hottest themes in the market. With institutional adoption accelerating and its DeFi ecosystem maturing, the growth potential for BTC staking is especially strong.
With a total addressable market in the hundreds of billions of dollars, Bitcoin staking represents a significant opportunity for investors. As more institutions become involved and the DeFi ecosystem continues to mature, we can expect to see novel strategies emerge across the risk curve with Bitcoin as a collateral asset.
Whether it’s through staked BTC ETFs or liquid staking tokens (LSTs), there are many ways to participate in the growth of Bitcoin DeFi. As the market continues to evolve, one thing is certain: Bitcoin will remain at the forefront of the decentralized finance revolution.
References
- [1] Staking Rewards. (2024). Bitcoin Staking TVL. Retrieved from https://www.stakingrewards.com/
- [2] Bitwise. (2024). The Rise of Institutional Adoption in Crypto. Retrieved from https://bitwise.com/blog/
- [3] Agoric. (2024). Bitcoin’s All-Time High Sparks Renewed Interest in Crypto. Retrieved from https://www.agoric.io/
