Bitcoin's decentralized finance (DeFi) sector, referred to as BTCFi, attracted substantial venture capital (VC) interest, securing $175 million across 32 funding rounds in the first half of 2025. This marks a significant increase in investment as institutional interest in Bitcoin's yield-bearing potential grows. A report by Maestro highlighted that out of the total deals, 20 were directed towards DeFi, custody, or consumer applications, indicating a shift towards usability and demand-driven products. Notably, first-quarter funding reached $130 million but saw a sharp decline in the second quarter, dropping to $44 million. Experts, including Marvin Bertin, suggest that the convergence of traditional finance (TradFi) and DeFi is becoming increasingly evident, driven by the necessary advancements in infrastructure for on-chain financial applications on Bitcoin. The call for improved interoperability between the two sectors could accelerate the dissolution of existing boundaries, opening new avenues for Bitcoin-based DeFi functionalities. Interest in building these capabilities has notably spiked since the Runes protocol's introduction in 2024, solidifying Bitcoin’s transition from a static asset to a dynamic financial network.

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