The Problem
Why do we need a Bitcoin liquidity protocol?
Last updated
Why do we need a Bitcoin liquidity protocol?
Last updated
Bitcoin holders lack opportunities to deploy Bitcoin capital, hindering Bitcoin‘s widespread adoption.
Bitcoin liquidity protocols today are scarce and the current alternatives lack transparency and scalability. Over 70% of BTC has been idle for the past year, highlighting the lack of attractive solutions to deploy liquidity.
The current landscape of Bitcoin solutions poses significant counterparty and intermediary risks. These risks can arise from problematic middlemen or the challenges associated with bridging Bitcoin transactions. Bitcoin, as a decentralized and trustless system, holds tremendous potential to revolutionize the financial world. However, the above-mentioned risks have thus far impeded its growth. Existing solutions often demand investors to relinquish custody of their assets to intermediaries, who may not consistently act in the best interest of their clients. Additionally, investments involving Bitcoin typically lack transparency, making it difficult for investors to gain a comprehensive understanding of the associated risks and potential returns.
These risks not only pose a threat to individual investors but also limit the broader adoption of Bitcoin by institutional investors and large-scale financial institutions. Addressing these challenges will be crucial for the continued growth and broader adoption of Bitcoin in the years to come.
As of today, Bitcoin’s main use cases revolve around being a speculative asset and a reserve asset. A growing share of the Bitcoin supply is idling in inactive wallets, constraining the available liquidity of Bitcoin and limiting its current potential. A key constraint of Bitcoin today is that Bitcoin holders lack attractive solutions to put their Bitcoin holdings to work and earn passive alpha.
Creating a capital market for Bitcoin is crucial for unlocking its full potential. Bitcoin has already proven its value as a reserve asset, but the lack of liquidity remains a significant challenge for the Bitcoin economy. By establishing Bitcoin capital markets, investors will be able to put their Bitcoin holdings to work and generate returns while adding liquidity to the Bitcoin ecosystem. A fully-functional and liquid capital market is vital for the long-term growth and stability of the Bitcoin economy.