Institutional investment in Bitcoin has reached a significant milestone, with 172 publicly traded companies now holding over one million Bitcoin (BTC), worth $117 billion, as of the third quarter of 2025. This represents a 39% increase in the number of companies and a 21% increase in investments compared to the previous quarter. According to a recent Bitwise report, Bitcoin has established itself as a pillar of institutional financial strategies, despite its price fluctuations.
The Rise of Institutional Bitcoin Investment
Bitcoin’s evolution from a speculative asset to a hedging instrument has been remarkable. Less than two years after spot Bitcoin ETFs were approved in the United States, institutional Bitcoin holdings have quietly entered a new phase, shifting from mere exposure to return-producing investments. This development is a testament to the growing recognition of Bitcoin’s value as a store of wealth and a hedge against inflation.
The Convergence of Bitcoin and DeFi
The first chapter of DeFi was characterized by a cypherpunk revolution, with Ethereum (ETH) at its forefront. However, Bitcoin has now become a yield-producing asset, valued by treasuries, institutions, and nation-states. The convergence of Bitcoin and DeFi has created a new monetary system based on code and resistant to centralized control. As a result, institutions are now looking to unlock the full potential of their Bitcoin holdings, seeking permissioned, compliant infrastructure to deploy their idle capital.
Institutional Demand for Bitcoin-Native DeFi
The growth of institutional demand for Bitcoin-native DeFi is driven by the need for compliant, return-producing instruments. Custodian banks manage over $200 billion worth of Bitcoin for their institutional clients, but this capital remains largely idle due to the lack of suitable DeFi infrastructure. The existing DeFi stack is incompatible with institutional operational reality, which requires permissioned, compliant infrastructure, including custody integration, in-kind BTC yield, and privacy-preserving auditability.
Requirements for Institutional Bitcoin Integration
To cater to the specific needs of institutions, some aspects of the Bitcoin-based financial applications will need to adapt. The key requirements include:
- Custody integration: Institutions hold crypto through custodians that provide additional security features, such as recovery and multisig management.
- Bitcoin-native yield: Institutions prefer non-cash returns, which is Bitcoin.
- Approved DeFi: Institutions need auditability that protects privacy and verifies compliance without disclosing policies.
Final Thoughts
The convergence of Bitcoin and DeFi has created a robust financial system that attracts smart money. Combining compliance with on-chain innovation in a permissioned environment would open the institutional floodgates not only for yield products but also for the broader Bitcoin-based financial system. As regulatory clarity, Bitcoin-native DeFi infrastructure, and institutional frameworks final
