Bitcoin DeFi narrows focus to institutions amid liquidity drop

Bitcoin DeFi projects are shifting focus to institutional investors and long-term holders as sector liquidity drops, with demand now concentrated among a few well-funded groups and limited retail adoption.

Bitcoin-based decentralized finance (DeFi) projects are facing a sharp decline in overall liquidity. The total value locked in DeFi protocols has plummeted from about $180 billion in October 2023 to around $70 billion by June 2026, according to multiple data sources. In response, projects like Rootstock are shifting their strategies. Rather than targeting broad retail adoption, they are now focusing on niche, well-capitalized user groups such as institutional investors, miners, and long-term Bitcoin holders. This move aims to address the specific needs of entities with substantial Bitcoin holdings. The trend is underscored by the closure of Botanix, a Bitcoin Layer 2 project, which cited insufficient organic demand for Bitcoin-native DeFi. Despite strong security infrastructure and increased visibility in mainstream finance, demand for Bitcoin DeFi remains concentrated among a small number of institutional players, with retail participation still limited.