Institutions are viewing BTCFi (Bitcoin Finance) as Decentralized Protocols (DATs) face increasing yield pressure.
Digital asset treasuries (DATs) were a prominent feature of the previous market rally, fueled by the strategy of holding Bitcoin (BTC) on corporate balance sheets as a value-generating asset. Many DATs attracted significant market premiums simply by accumulating BTC at a pace exceeding their competitors. However, as market conditions normalize and net asset values (NAVs) tighten, these treasuries are now recognizing that passive exposure alone is no longer sufficient for success. “There’s been this collective realization as NAVs start to squeeze,” Matt Luongo, co-founder and CEO of Bitcoin finance platform Mezo, explained to CoinDesk in an interview. “Most of them don’t actually have an edge over anyone else in buying Bitcoin—you can go do that yourself. Now they need to earn yield and deploy strategies that retail investors might not yet know about.” Several DATs that had experienced significant growth and subsequently entered the public markets are now confronting a markedly different environment—one in which investors increasingly demand operational performance or revenue generation, rather than merely Bitcoin appreciation. Even established corporate bellwethers of Bitcoin strategy have faced comparable pressure. Across the entire category, the argument that simply holding Bitcoin represents the full scope of the business model has gained considerable traction.
Brian Mahoney, Mezo’s co-founder, added that DATs also face a narrative constraint. “These companies want the yields that exist in ecosystems like Ethereum or Solana, but they can’t go there,” he stated. “It’s a violation of the story they’ve told shareholders. You can’t claim to be a Bitcoin-native treasury while earning your yield from ether (ETH) staking.” The shift is creating a pressing question within the financial landscape: what can Bitcoin truly do? Anchorage Digital, a federally chartered cryptocurrency bank that serves a diverse range of clients, including hedge funds and public companies, is observing a notable change in the questions being posed by its clients. “If all you want is price exposure, there are plenty of ways to get that,” Anchorage Digital CEO Nathan McCauley noted in an emailed comment. “But institutions increasingly want their Bitcoin to be productive—to earn rewards, unlock liquidity, or serve as collateral. They want infrastructure that allows them to interact directly with the Bitcoin economy, securely and in full compliance.” Through Anchorage’s self-custody wallet, Porto, clients can now lock up BTC to earn on-chain rewards or borrow against their holdings. “We’re enabling institutions to put Bitcoin to work without selling it, without moving into unregulated environments, and without compromising on custody,” McCauley explained.
The exponential growth of Bitcoin Decentralized Finance (BTCFi)—beginning with approximately $200 million in total value locked in last October and peaking around $9 billion in early October—reflects a rising interest in the space. However, McCauley highlights that this figure remains “a drop in the bucket compared to the total Bitcoin supply.” Early patterns of adoption are emerging, with institutions categorized into three distinct groups: hedge funds and multi-strategy firms seeking directional yield; asset managers and DATs holding significant Bitcoin reserves; and crypto-native funds that desire access to BTCFi without constructing their own infrastructure. Across these groups, consistent demands include: predictable economics, clear collateral mechanics, and fully explainable risk profiles. The initial offering via Porto—allowing institutions to borrow against their BTC at fixed rates through Mezo’s MUSD stablecoin at rates starting at 1%—aligns with these requirements, and staking functionality is slated to follow, according to McCauley.
The next 12 to 24 months could mark a significant acceleration in BTCFi participation, provided several structural components coalesce. “The inflection point arrives when complexity disappears,” McCauley stated. “When institutions can activate their Bitcoin through familiar custody, compliance, and settlement workflows rather than building parallel systems.” He identifies three key drivers of scale: regulatory clarity, custody integration, and risk frameworks that map to institutional thinking. “When those pieces align,” he elaborated, “you can easily see tens of billions of institutional BTC shift from passive holding to productive deployment.” Luongo believes this shift is already underway, noting that conversations with CEOs in the sector are characterized by a sense of urgency driven not by price fluctuations, but by competitive pressures. “Big banks we thought would move slowly are coming in six to 18 months,” he said. “Behind the scenes, deals are happening fast.” Mahoney points to fintech convergence as another driver, with traditional finance front-ends plugging into tokenized rails, allowing users to interact with cryptocurrency without realizing it.
A new partnership between Anchorage Digital and Mezo offers a pathway for institutions into BTCFi. Through Porto, institutions can now borrow against their BTC using Mezo’s MUSD stablecoin at fixed rates starting at 1%. Borrowing via MUSD is currently live, while veBTC rewards are scheduled to roll out across Porto and Anchorage’s wider platform.
