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Bitcoin's Role in DeFi Is 'Untapped Opportunity,' Binance Research Says
The Bitcoin network is evolving into a wider DeFi ecosystem, the report said.
Mar 13, 2025, 5:48 p.m.
What to know:
- Bitcoin has evolved from more than just a store of value, a Binance Research report said.
- The report said the network is developing into a decentralized finance ecosystem.
- Only about 0.8% of bitcoin is currently being used in DeFi, the report noted
Bitcoin's (BTC) role in decentralized finance (DeFi) is growing as the world's largest cryptocurrency evolves from more than just a store of value, Binance Research said in a report Thursday.
The Bitcoin network is "evolving into a broader decentralized finance ecosystem with the emergence of Bitcoin DeFi," analyst Moulik Nagesh wrote.
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This is a sector that "unlocks bitcoin's capital efficiency" with the use of financial applications focused on lending, staking, stablecoins and decentralized exchanges (DEX's), the report said.
DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain, without the need for traditional intermediaries.
Binance noted that only ~0.8% of the bitcoin supply is currently being used in DeFi, and this presents a large "untapped opportunity." In fact, last year, Julian Love, a deal analyst at Franklin Templeton Digital Assets, said the opportunity could be as much as $1 trillion.
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Binance Research report said that Bitcoin needs layer 2s as the network lacks "native programmability," unlike smart contract-based layer 1s. A layer 1 network is the base layer or the underlying infrastructure of a blockchain. Layer 2 refers to a set of off-chain systems or separate blockchains built on top of layer 1s.
While there has been some progress on the development of Bitcoin layer-2 networks, these platforms need greater adoption and liquidity incentives to be able to scale up effectively, Binance Research said.
The network's security model is faced with "long-term sustainability challenges" as block rewards will continue to halve, the report said, thereby reducing miner incentives.
The long-term viability of Bitcoin DeFi is dependent on execution, the further development of layer-2s, and the "ability to align with bitcoin's unique value proposition," the report added.
Read more: Ethereum L2 Starknet Seeks 'Bitcoin's DeFi Take-Off Moment' With BTC Wallet Xverse
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Exchange Review - March 2025
CoinDesk Data's monthly Exchange Review captures the key developments within the cryptocurrency exchange market. The report includes analyses that relate to exchange volumes, crypto derivatives trading, market segmentation by fees, fiat trading, and more.
What to know:
Trading activity softened in March as market uncertainty grew amid escalating tariff tensions between the U.S. and global trading partners. Centralized exchanges recorded their lowest combined trading volume since October, declining 6.24% to $6.79tn. This marked the third consecutive monthly decline across both market segments, with spot trading volume falling 14.1% to $1.98tn and derivatives trading slipping 2.56% to $4.81tn.
- Trading Volumes Decline for Third Consecutive Month: Combined spot and derivatives trading volume on centralized exchanges fell by 6.24% to $6.79tn in March 2025, reaching the lowest level since October. Both spot and derivatives markets recorded their third consecutive monthly decline, falling 14.1% and 2.56% to $1.98tn and $4.81tn respectively.
- Institutional Crypto Trading Volume on CME Falls 23.5%: In March, total derivatives trading volume on the CME exchange fell by 23.5% to $175bn, the lowest monthly volume since October 2024. CME's market share among derivatives exchanges dropped from 4.63% to 3.64%, suggesting declining institutional interest amid current macroeconomic conditions.
- Bybit Spot Market Share Slides in March: Spot trading volume on Bybit fell by 52.1% to $81.1bn in March, coinciding with decreased trading activity following the hack of the exchange's cold wallets in February. Bybit's spot market share dropped from 7.35% to 4.10%, its lowest since July 2023.
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