Bitcoin DeFi Could ‘Unlock Billions in BTC Liquidity’: Binance Report

The fast-moving, risky world of decentralized finance—or DeFi—is what could soon make Bitcoin “HODLers” more money on their investment, according to new research from Binance. 

A Thursday report from the world’s biggest crypto exchange says that using Bitcoin, the biggest and oldest cryptocurrency, on DeFi protocols is a “large untapped opportunity” and has the “potential to unlock billions in dormant BTC liquidity and enhance Bitcoin’s capital efficiency.” 

Only about 0.79% of bitcoin is in use for DeFi, the report noted. 

Bitcoin is a payment network originally created to send money anywhere in the world at any time. But it is now largely sold—especially since the approval of spot ETFs in the U.S. last year—as “digital gold”: an inflation hedge against collapsing currencies.

That’s why a lot of investors hold—or “HODL” in crypto speak—the asset for years (with many seeing large returns.) 

Binance says that using the cryptocurrency in DeFi could help investors earn even more money. 

“Bitcoin’s architecture was not designed to support complex financial applications,” Thursday’s report reads, adding that with DeFi apps, “BTC holders now have greater flexibility to put their Bitcoin to work—whether by using it as collateral for financing, lending it out for yield, or engaging in structured products.”

This would work as developers work on growing apps in the DeFi space that are compatible with Bitcoin—especially since the Securities and Exchange Commission scrapped the Staff Accounting Bulletin (SAB) No. 121 under the new crypto-friendly Trump Administration.  

DeFi allows people to do things through blockchain technology that traditional financial products already do: borrow, lend, or earn yield. 

Such apps are typically built on Ethereum, the second biggest crypto network. Bitcoin on DeFi has existed for some time but has never really caught on, Binance notes. 

Now, though, just like gold and treasuries are used in traditional financial markets, Bitcoin should become “more productive” as its base grows and more Layer-2 networks become available to allow Bitcoin investors to put their money to work, Binance says. 

The DeFi world is experimental and the industry has been plagued by hacks and scams, with investors losing huge amounts of money over the years. 

“Unlike traditional DeFi users, BTC holders have historically prioritized security, self-custody, and long-term value preservation over active capital deployment,” the report said. “BTCFi applications will need to align with these preferences.”

The report added that if protocols in development 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.”

Edited by James Rubin