TLDR
- Only about 0.79% of Bitcoin is currently being used in DeFi applications, indicating significant untapped potential
- Binance research suggests BTCFi (Bitcoin DeFi) could unlock billions in dormant Bitcoin liquidity
- The SEC’s removal of Staff Accounting Bulletin No. 121 under the Trump administration has created a more favorable regulatory environment
- Bitcoin DeFi faces challenges including cultural resistance, technical barriers, and the need for layer 2 solutions
- BTCFi could help sustain Bitcoin’s security model by generating higher on-chain transaction fees
Bitcoin holders traditionally fall into the “HODL” camp – buying and holding their digital assets for long-term growth rather than actively using them. This strategy has paid off for many investors, especially since Bitcoin’s price has risen to over $82,000. But a new report from Binance suggests there’s an opportunity to put that dormant Bitcoin to work through decentralized finance (DeFi) applications.
Under 1% of Bitcoin currently being used in DeFi
The world’s largest cryptocurrency exchange released research on March 13, 2025, highlighting how Bitcoin DeFi (BTCFi) represents a “large untapped opportunity.” According to their findings, only about 0.79% of all Bitcoin is currently being used in DeFi protocols. This low utilization rate points to massive potential growth.
Bitcoin was created as a payment network that allows people to send money worldwide at any time. However, its role has evolved over the years. Many now view it as “digital gold” – an inflation hedge against unstable currencies.
This shift in perception has led many investors to simply hold their Bitcoin for years. While this approach has generated returns, Binance suggests that DeFi applications could make that Bitcoin work harder. Their report states that “BTC holders now have greater flexibility to put their Bitcoin to work.”
These opportunities include using Bitcoin as collateral for loans. Holders can also lend out their Bitcoin to earn yield. Some can even engage with more complex financial products without selling their underlying assets.
DeFi itself refers to financial applications built on blockchain technology. These applications replicate traditional financial services like borrowing and lending but without middlemen like banks. Most DeFi applications have traditionally been built on Ethereum rather than Bitcoin.
The technical limitations of Bitcoin have hindered DeFi growth on its network. “Bitcoin’s architecture was not designed to support complex financial applications,” the Binance report notes. This is why developers are working on layer 2 solutions that can expand Bitcoin’s capabilities.
The regulatory environment for Bitcoin DeFi has improved recently. The Securities and Exchange Commission scrapped Staff Accounting Bulletin No. 121 under the Trump administration. This change has created more favorable conditions for Bitcoin DeFi development.
BitMEX released a similar report in February 2025. They indicated that decentralized finance markets are approaching “a critical inflection point” thanks to pro-crypto policy frameworks under the current administration. Their research suggested that the environment now appears “more receptive to innovation than in previous years.”
Both reports emphasize that Bitcoin’s potential in DeFi remains largely untapped. Even a small percentage increase in Bitcoin used for DeFi could drive billions in new inflows to the sector. This could create fresh opportunities for both retail and institutional investors.
DeFi does come with risks
The DeFi world does come with risks that potential users should understand. The industry has experienced hacks and scams in the past. Many investors have lost money through experimental protocols with security vulnerabilities.
Binance acknowledges these concerns in their report. They note that “Unlike traditional DeFi users, BTC holders have historically prioritized security, self-custody, and long-term value preservation over active capital deployment.” This means BTCFi applications will need to address these security concerns to gain adoption.
Technical barriers also present challenges for Bitcoin DeFi. Unlike smart contract platforms like Ethereum, Bitcoin lacks native programmability. This makes layer 2 solutions essential for BTCFi growth, though these remain in early development stages.
Bitcoin DeFi could help sustain miner incentives
Another factor that could drive Bitcoin DeFi adoption is its potential impact on network security. As Bitcoin block rewards continue to halve over time, transaction fees will become more important for miner revenue. BTCFi could help sustain miner incentives by generating higher on-chain fees.
Cross-chain interoperability will be crucial for Bitcoin DeFi success. Currently, most Bitcoin used in DeFi exists in wrapped forms on other blockchains like Ethereum. Secure bridges between these ecosystems will be necessary to attract users from existing DeFi platforms.
The Binance report concludes that if emerging protocols are “successful, DeFi is coming to Bitcoin—and by leveraging the security and resilience of the original blockchain, BTCFi stands to be a sector worth watching closely.” This suggests that while still in early stages, Bitcoin DeFi could represent the next frontier in cryptocurrency innovation.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
