Bitwise Asset Management has taken a clear step into decentralized finance with the launch of its first onchain vault strategy, built on the Morpho lending protocol. The new product targets yields of up to 6% on the USDC stablecoin, marking Bitwise’s debut as an active curator of DeFi strategies rather than just a distributor of crypto investment products.
Best known for its crypto exchange-traded funds, Bitwise says the move reflects growing demand from investors who want access to onchain yield without having to manage the technical and risk-heavy side of DeFi themselves.
A Curated Approach to Onchain Yield
The newly launched vault deploys capital into over-collateralized lending markets on Morpho, a decentralized lending protocol that has gained traction with both crypto-native users and large platforms. According to Jonathan Man, Bitwise’s head of multi-strategy solutions and portfolio manager, the goal is to offer competitive stablecoin yield while maintaining strict risk controls.
Man said the firm plans to expand support beyond USDC over time, potentially including other major stablecoins and crypto assets. Bitwise is also exploring a wider range of DeFi strategies, such as real-world asset tokenization, decentralized exchange liquidity provision, and yield farming.
The core pitch is simplicity. Instead of requiring users to actively manage lending positions or monitor risk parameters, Bitwise designs and oversees the strategy. Funds remain non-custodial and fully onchain, meaning users retain control of their assets while benefiting from professional portfolio construction.
“ETFs 2.0” for the Blockchain Era
Bitwise has previously described onchain vaults as “ETFs 2.0”, a label meant to highlight their automated, rules-based structure. Like an ETF, a vault represents exposure to a basket of positions, but instead of stocks or bonds, those positions live entirely onchain and are managed by smart contracts.
Vaults have grown quickly as a category. Bitwise noted that assets in vault-based strategies rose from under $100 million in 2024 to about $2.3 billion, before surging further in 2025 and peaking at $8.8 billion. That growth was interrupted later in the year when market volatility exposed weak risk management in some vaults, leading to losses and capital outflows.
Bitwise views that period as a necessary reset. The firm argues that the next phase of growth will favor curators with stronger risk frameworks and clearer accountability, rather than yield-at-any-cost strategies.
Growing Competition for Onchain Yield
Bitwise is entering a market that’s becoming increasingly competitive. Onchain yield products are now a focus for several major crypto platforms.
Kraken recently announced a “DeFi Earn” product built on vault infrastructure from Veda, advertising potential yields of up to 8%. Coinbase has also offered onchain lending via Morpho for more than a year, though it does not act as a vault curator.
Morpho co-founder and CEO Paul Frambot explained the distinction. In Coinbase’s case, the exchange focuses on distribution and user experience, while independent curators design and manage the underlying strategies. Bitwise, by contrast, is joining Morpho directly as a curator, taking responsibility for strategy design, risk management, and capital allocation onchain.
Risks Remain Part of the Equation
Despite their transparency and automation, onchain vaults are not risk-free. DeFi lending can be affected by smart contract vulnerabilities, sudden drops in collateral value, and broader market stress. Vaults are not insured, and losses can be shared among participants if things go wrong.
Bitwise’s entry signals growing institutional interest in addressing those risks with more formal oversight. Whether that approach is enough to bring cautious investors off the sidelines will depend on performance, discipline, and how well these products hold up in volatile markets.
