"Crypto's New Wave: Institutions Embrace On-Chain Finance Despite ByBit Hack"

Crypto for Advisors: DeFi and On-Chain Finance

The recent hack of ByBit, which resulted in the loss of nearly 401,000 ETH valued at about $1.5 billion at the time, underscored the importance of security in the crypto space. Despite this incident, institutions are expected to continue expanding their presence in on-chain finance, provided they implement robust security measures.

Marcin Kaźmierczak, COO of Redstone Oracles, predicts that 2025 will be a critical year for decentralized and on-chain finance. He highlights several trends contributing to this growth:

• Growing adoption of yield-bearing assets, such as staking, liquid staking, restaking, and liquid restaking, which align with traditional valuation methods prioritizing ongoing dividends.
• Explosive growth in liquid restaking platforms like ether.fi, with over $8 billion worth of ether staked through its rails in 2024.
• Stablecoin growth, driven by global demand for U.S. dollar exposure and regulatory frameworks like the EU’s MiCA, which have legitimized stablecoins and facilitated their integration into traditional financial systems.
• Enhanced interoperability and user-friendly non-custodial solutions, which aim to simplify the process for new DeFi users and attract more participants to the space.
• The increased acceptance of bitcoin by large banks and some governments, which is anticipated to change the public's perception of digital currencies and bring new users on-chain.

Institutional adoption of bitcoin is also gaining momentum, as seen in recent 13-F filings. Kevin Tam, a digital asset research specialist, highlights key positions in Ask and Expert:

• Mubadala Investment Company PJSC, a wealth fund owned by the government of Abu Dhabi, holds $436 million in one bitcoin ETF, indicating that their bitcoin investment is a relatively small portion of the overall portfolio.
• The State of Wisconsin Investment Board's bitcoin ETF holdings have more than doubled from last quarter to over $321 million.
• Bank of Montreal now tops Canadian banks with $139 million in spot bitcoin ETF investments, with holdings going from zero to over $100 million in a single year.