- Bitwise launches a non custodial onchain vault on Morpho to offer stablecoin yield with managed risk for investors.
- The vault keeps user funds onchain while Bitwise controls allocation and risk through smart contracts for lending.
- Institutional vaults gain traction as asset managers treat DeFi as core financial infrastructure for onchain finance.
Bitwise has launched its first onchain vault strategy, marking a direct entry into decentralized finance. The firm deployed the product through the Morpho lending protocol. The launch introduces a non-custodial structure focused on stablecoin yield. The initial strategy targets returns of up to 6%. It does so by allocating capital to overcollateralized lending markets. The vault operates fully onchain and keeps user funds under user control. Therefore, Bitwise does not take custody at any stage.
The product centers on USD Coin deposits. It allocates funds across lending pools where borrowers post excess collateral. This structure reduces counterparty exposure. At the same time, it preserves transparency through public blockchain records. All positions remain visible onchain. Moreover, the vault follows predefined risk limits. Smart contracts automate capital allocation within those limits. As a result, the strategy removes manual intervention from day to day operations.
Vault Structure and Risk Oversight Model
The vault functions like a portfolio of lending positions rather than a single loan pool. Bitwise designs the strategy and oversees real time risk controls. Meanwhile, the underlying assets remain non-custodial. This setup separates asset ownership from strategy management. Consequently, investors gain onchain yield exposure without managing complex parameters themselves.
The firm applies institutional risk frameworks developed through years of crypto product management. It monitors collateral ratios and market conditions continuously. In addition, it adjusts allocations when risk thresholds change. This approach reflects growing demand for managed DeFi access. Many investors seek yield without direct protocol interaction. Therefore, curated vaults aim to bridge that gap.
Bitwise has described onchain vaults as a new investment format. The firm expects this segment to expand further. Vault assets grew sharply during 2024 and early 2025. However, volatility later exposed weak risk controls across some strategies. That pullback reset expectations. Since then, focus has shifted toward higher quality curators.
Morpho’s Role in Institutional DeFi Expansion
Morpho supports this model by separating infrastructure from strategy design. The protocol provides standardized smart contracts. Professional managers then build custom lending strategies on top. This structure allows flexibility while maintaining protocol level consistency.
Several platforms already distribute Morpho based lending products. For example, Coinbase offers access to Morpho lending without acting as a strategy curator. In that case, the exchange focuses on user access. Strategy design remains external. In 2024, Coinbase enhanced security with its Vaults technology, integrating multiparty computation (MPC) to protect digital assets. Bitwise now joins Morpho directly as a curator. This role includes allocation decisions and risk management.
The vault can reach users through exchanges and fintech platforms. Those platforms can offer yield products without managing strategies themselves. As a result, Morpho acts as shared infrastructure for institutional DeFi services.
Broader Market Context for Onchain Yield
Onchain yield has become a priority across major crypto platforms. Earlier today, Kraken launched a DeFi Earn product built on vault infrastructure. Competition in this area continues to increase. Asset managers now view DeFi as core financial infrastructure. Additionally, World Liberty Financial recently linked DeFi payments with satellite internet to reach users in regions without banks.
Despite growth, risks remain. Smart contract flaws can cause losses. Sharp collateral price drops can also impact lenders. In addition, vaults do not carry insurance protections. Losses can spread across participants within the same vault. Therefore, risk oversight remains critical.
Bitwise has not shared timelines for expanding beyond USDC. However, the firm plans to explore other assets and strategies. These may include real world assets and additional yield models. The launch signals a shift in how traditional crypto managers approach onchain finance.
