Disclaimer: Information found on CryptoreNews is those of writers quoted. It does not represent the opinions of CryptoreNews on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoreNews covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.
GlobalStake co-founder states that institutions seek bitcoin yield comparable to traditional finance, not increased risk.
Collateralized, market-neutral strategies, rather than DeFi or smart contracts, are rekindling institutional interest, according to GlobalStake co-founder Thomas Chaffee.
What to know:
- Institutional investors are experiencing a resurgence of interest in bitcoin yield as new fully collateralized, market-neutral strategies tackle previous concerns regarding smart contract risks, leverage, and lack of transparency.
- GlobalStake has introduced a Bitcoin Yield Gateway to consolidate various third-party yield strategies within a single, institutional-grade onboarding and compliance framework, anticipating approximately $500 million in BTC allocations within a three-month timeframe.
- Companies like GlobalStake and Babylon Labs are developing infrastructure to enhance the productivity of bitcoin for professional holders, either by generating yield or allowing native BTC to function as non-custodial collateral across financial applications.
Institutional perceptions of bitcoin yield are beginning to evolve, with a renewed interest in BTC rewards following years of skepticism fueled by smart contract risks, leverage, and opaque strategies, as stated by GlobalStake co-founder Thomas Chaffee to CoinDesk on Thursday.
Products enabling users to earn returns on their bitcoin holdings frequently necessitate wrapping BTC into protocols, which involves smart contract risks or strategies that lack scalability, leading institutions to regard it as lacking “a sensible risk-return profile,” Chaffee noted.
STORY CONTINUES BELOWDon’t miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newslettersSign me up
Related Posts
This hesitation is beginning to shift, according to Chaffee, not due to institutions suddenly seeking greater risk, but because the available strategies have progressed. Instead of relying on protocol-based yields or token incentives, allocators are progressively leaning towards fully collateralized, market-neutral methods that are reminiscent of traditional financial strategies familiar to hedge funds and treasuries, he explained.
“The change in behavior we are witnessing is not institutions pursuing yield,” Chaffee stated. “It’s institutions finally engaging as the strategies, controls, and infrastructure appear to be something they can deploy capital into at scale.”
The renewed focus follows years of unsuccessful or fleeting attempts to generate yield on bitcoin, many of which collapsed during the 2022 market downturn, as major lenders froze withdrawals and ultimately failed amid liquidity challenges, with notable instances like crypto lending service Celsius Network indefinitely halting withdrawals and transfers citing “‘extreme market conditions’” in mid-2022 before subsequently filing for bankruptcy.
Chaffee is not alone in observing the revived institutional interest in bitcoin yield. “Individuals holding bitcoin, whether on balance sheets or as investors, increasingly view it as an asset that cannot remain idle,” Richard Green, director of Rootstock Institutional, remarked to CoinDesk recently. “It must be actively contributing yield.” Green indicated that professional investors now desire their digital assets to “perform as effectively as possible” within their risk parameters.
Chaffee noted that GlobalStake, which offers staking infrastructure across proof-of-stake networks, has been frequently asked by clients over the past few years whether comparable institutional-grade yield opportunities exist for bitcoin.
On Thursday, GlobalStake launched its Bitcoin Yield Gateway, a platform intended to aggregate various third-party bitcoin yield strategies under one onboarding, compliance, and integration layer.
The co-founder mentioned that the company anticipates around $500 million in bitcoin to be allocated during the initial three months of the gateway’s rollout. “We expect the bitcoin to be allocated during the gateway’s first-quarter roll-out period, sourced from a custodial partner based in Canada, demand generated by parties through our partner MG Stover, and our clients, which include family offices, digital asset treasuries (DATs), corporate treasuries, and hedge funds.”
Other companies are tackling the issue from the infrastructure perspective. For instance, Babylon Labs is working on systems that permit native bitcoin to be employed as non-custodial collateral across financial applications, aiming to enhance BTC’s utility rather than focusing solely on yield generation.
