On January 20, 2025, the price of Bitcoin surged to an incredible $109,114.88, marking an all-time high for the world’s oldest cryptocurrency and capping an incredible rise that began just over a year before.
The value of Bitcoin has risen by more than 100% in the last 12 months, driving optimism of an extended bull run that will boost the entire crypto market. But it’s Bitcoin that has so far been the star of the show, driven by growing institutional adoption thanks to the first Bitcoin ETFs, substantial corporate investments, the backing of nation-states, and most recently the speculation surrounding new U.S. President Donald Trump’s “crypto-friendly” administration.
However, another, less talked-about factor is pushing Bitcoin into new territory, for the underlying blockchain that powers it has benefited from some significant updates that enable developers to create new utility for what has come to be known as “digital gold”.
Rising adoption
Bitcoin’s bull run was kicked off by the debut of the first Bitcoin Exchange-Traded Funds or ETFs last year, which have spurred massive investment in the asset from hedge funds and other traditional financial institutions.
These investment vehicles, including BlackRock’s iShares Bitcoin Trust and Fidelity’s Fidelity Wise Origin Bitcoin Fund, have spent billions of dollars on accumulating Bitcoin on the open market to give traditional investors exposure to the asset for the first time. The secret to their success is that the ETFs are fully compliant instruments that negate the need for investors to hold BTC themselves, increasing trust.
Increasing numbers of investors want a secure and regulated way to gain access to Bitcoin and the ETFs do the job – as a result, they have driven strong gains in Bitcoin’s value since launching early last year.
In addition, Bitcoin has benefited from increasing adoption among enterprises that do have the stomach to hold their tokens, exemplified by the likes of MicroStrategy, which continues to buy up large amounts of BTC at regular intervals.
We’re also seeing increased adoption on the global stage, with El Salvador famously becoming the first country to make Bitcoin legal tender and also establishing a national BTC fund. Countries such as Russia and Japan are also said to be exploring the use of Bitcoin to stabilize their economies, and in the U.S., Trump himself has stated his ambition to create a “strategic reserve” of digital gold.
There’s also the ongoing economic uncertainty. Although it’s hard to quantify how much of an impact this has, there’s a lot of evidence to suggest that lower interest rates, higher inflation, and the weakening of fiat currencies have pushed individuals and businesses alike to seek safer havens in Bitcoin.
New utility unleashed
There’s no doubt that the above factors are all helping to drive Bitcoin’s growth, but there’s another force at play that is beginning to make its presence felt. For years, Bitcoin has been seen primarily as a store of value and a payment mechanism, but little more than that. That’s because it lacks the smart contract capabilities found in newer blockchains such as Ethereum and Solana, but a wave of innovations from developers means that’s no longer the case.
One key update was the arrival of the Lightning Network, which helped to solve Bitcoin’s scalability problems and enable faster and lower-cost transactions. A more important change came with the 2021 Taproot upgrade, which paved the way for Bitcoin to support smart contracts via Layer-2 networks such as Stacks, Rootstock, Liquid Network, and Merlin Chain.
Bitcoin’s nascent smart contract capabilities have led to the rapid rise of decentralized applications that expand the utility of the asset. No longer is BTC just a vehicle for sending funds – users can invest, lend, stake, and more. Suddenly, Bitcoin has become a tool for the future of finance.
The arrival of Bitcoin DeFi makes BTC a much more valuable asset, as it paves the way for investors to earn “yield” on their stashes of coins, dramatically increasing its allure. No longer do investors just have to “hodl” their Bitcoin in the hope that its value will rise. They can actively use the asset to generate value by engaging in a range of DeFi activities.
Staking & Restaking
One example is staking. With Babylon Network, users can stake their Bitcoins to secure proof-of-stake blockchains such as Cosmos and Polygon, providing economic security for those networks in exchange for regular rewards.
Then, through the new SatLayer protocol, Bitcoin holders can go further and “restake” their Bitcoin assets to maximize their earnings potential. SatLayer has developed the concept of Bitcoin Validated Services, which encourages users to restake the receipt tokens they receive when staking through Babylon, so they can provide security to decentralized services that run atop the Bitcoin blockchain. It enables those services to leverage the foundational security of the Bitcoin blockchain, eliminating the need to bootstrap their security while allowing Bitcoin stakers to increase their yield.
Lending and borrowing:
Besides staking and restaking, Bitcoin holders can also engage in traditional DeFi activities such as borrowing, lending, and providing liquidity.
One of the main platforms for this is Sovryn, which is a protocol that lives on the Rootstock network. It offers many services, including basic trading and swapping, and users can earn regular yield thereby providing liquidity to one of the various BTC liquidity pools it supports. By doing this, users can earn a portion of the transaction fees paid by other users to swap BTC for other assets.
The other main services it provides are lending and borrowing. For instance, someone who has BTC in their wallet can deposit it into one of Sovryn’s lending pools, and when someone takes out a loan, they’ll earn a share of the interest charged on top of the repayments. As an alternative, investors can use their idle BTC as collateral to take out a loan in another cryptocurrency, which might provide higher DeFi yields.
NFTs:
Bitcoin holders can even invest in NFTs. Thanks to Stacks, Bitcoin-native non-fungible tokens are now a thing, and they utilize its novel proof-of-transfer mechanism to access both the security and liquidity within the Bitcoin ecosystem. Fast-growing platforms including Gamma.io and Stacks Art offer access to a thriving market for Bitcoin NFTs, which now number in the millions.
The best is yet to come
These developments suggest that Bitcoin has evolved far beyond its original purpose, and is fast becoming a mature and productive financial instrument that can provide strong returns for smart investors who know how to harness yield via DeFi. Bitcoin has gained much greater utility, and this will almost certainly become a driving force behind its expanding market cap in the years to come.
Add to this the institutional adoption and its growing attractiveness as a strategic reserve, and there are good reasons to think that Bitcoin’s best years are yet to come. Bitcoin is no longer just a speculative asset, and it’s no longer just “hodl” and hope. Rather, Bitcoin sits at the heart of an entirely new, more efficient and secure financial system.
| Disclaimer: The text above is an advertorial article that is not part of Coincu.com editorial content. |
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