Bitcoin is evolving from a static store of value to an active participant in decentralized finance (DeFi), supported by new projects and innovations. Its primary use case has shifted over the last 15 years, with a market cap over $2 billion. Recent growth in Bitcoin Layer-2 (L2) solutions is unlocking substantial liquidity, enhancing utility and adoption of DeFi applications. The total value locked (TVL) in Bitcoin DeFi reached an all-time high of $7.48 billion as of December 2024, primarily in restaking protocols. Enhanced regulatory clarity in the U.S. is expected to bolster investor confidence, encouraging more users to engage with Bitcoin DeFi. Despite some resistance from Bitcoin whales concerning added utility, projections suggest significant potential exists, with the possibility of capturing $47 billion in Bitcoin DeFi through similar utility penetration as Wrapped Bitcoin. This transition could secure Bitcoin’s network sustainability and enhance its appeal in the broader crypto ecosystem.

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