Bitcoin is indisputably hot, with a market cap of over $1.9 trillion. It accounts for almost 60% of total digital asset market capitalization, which is $3.12 trillion. Its relatively recent development as a digital gold standard has made it immediately popular as a trustworthy store of value.
This favorable institutional adoption for Bitcoin has been almost universally attributed to its alluringly simple, compelling narrative, digital gold. Moreover, with several other publicly listed companies adding Bitcoin to their balance sheet as a reserve asset, Bitcoin’s legitimacy has only grown. In addition, Bitcoin is by far the most liquid cryptocurrency with several billion dollars in daily trading volumes globally.
Franklin Templeton is taking its Bitcoin investment strategy a step further by starting to include decentralized finance (DeFi) applications. This decision comes to increase the usefulness of Bitcoin and offer new yield generating possibilities to their investors.
Franklin Templeton's Bitcoin ETF (EZBC) has registered net inflows of $260 million since its debut on Jan. 11 last year. The fund has a massive 5,213 BTC. At Bitcoin’s price today of a little over $97,000 that’s over half a billion dollars in assets under management. Since their introduction last January, the 11 of these so-called spot ETFs currently available in the U.S. have pulled in close to $40 billion in investor cash. By contrast, Ether ETFs have received a fraction at just under $3 billion in net inflows.
Franklin Templeton is an investor in Bitlayer, a BitVM that serves as Bitcoin's computational layer while preserving the mainnet's security. This investment goes a long way towards realizing Satoshi Nakamoto’s original vision for the Bitcoin blockchain. Its goal is to establish an open financial system that fosters innovation and creativity while improving individuals’ financial sovereignty and privacy.
In bitcoin, the reward for adding a new block is cut in half every four years. Higher on-chain activity spurred by new DeFi applications could lead to increased transaction fees and help make up for the decrease in block reward. Bitcoin DeFi has seen increased demand from BTC holders looking for alternative sources of yield.
"I don’t think focusing on Bitcoin DeFi will dilute or complicate Bitcoin’s core narrative. Instead, it expands Bitcoin’s utility for a specific type of investor — one with enough technical sophistication to optimize for yield, security, or custom portfolio needs. These users aren’t replacing the 'store of value' thesis; they’re building on it. It's not narrative dilution, it's infrastructure evolution." - Kevin Farrelly
"Importantly, Bitcoin DeFi also introduces new transaction fees — a critical component for the network’s long-term sustainability and security as block rewards continue to decline," - Kevin Farrelly
"Bitcoin DeFi with trust minimized bridge, sustainable yield products for onchain bitcoin holders is becoming very important for bitcoin asset holders and the network maintainers,” - Charlie Yechuan Hu
