Bitwise Asset Management, a firm best known for its cryptocurrency exchange-traded funds (ETFs), has launched its first on-chain vault strategy via the decentralized lending protocol Morpho. This move marks the firm's official entry into the decentralized finance (DeFi) market.
The initial vault targets a yield of up to 6% on the USDC stablecoin by deploying capital into over-collateralized lending markets on the Morpho Blue protocol. Jonathan Man, Bitwise’s head of multi-strategy solutions and portfolio manager, explained that the curated vault strategies are designed to make DeFi more accessible to investors seeking on-chain yield without having to manage complex risk parameters themselves.
"Decentralized finance, or DeFi, offers compelling yield opportunities, but the complexity of managing onchain risk has kept many investors on the sidelines," Man said. "Bitwise provides a critical value-add by layering institutional-grade risk management and regulated oversight onto these non-custodial tools."
Under the structure, Bitwise oversees strategy design and real-time risk management, while user funds remain non-custodial and held directly on the Ethereum blockchain. Vaults function like a portfolio of lending positions, using smart contracts to automatically allocate capital within predefined risk limits.
Man confirmed that while the initial focus is on USDC, the vault may support other major stablecoins and crypto assets in the future. The firm also plans to explore a broader set of DeFi strategies, including real-world asset (RWA) tokenization, decentralized exchange (DEX) liquidity provision, and yield farming.
Bitwise has described on-chain vaults as "ETFs 2.0" and expects assets under management in vaults to double this year. The firm noted that vaults began gaining traction in 2024, growing from less than $100 million to $2.3 billion in assets. Interest accelerated in 2025, with assets peaking at $8.8 billion before a market volatility event in October exposed weak risk management in some strategies, leading to losses and outflows. Bitwise views this pullback as a necessary reset, arguing that higher-quality vault curators will attract fresh capital.
The launch is part of a growing trend of major crypto platforms focusing on on-chain yield products. On the same day, Kraken announced a new "DeFi Earn" product built on vault infrastructure from Veda, targeting yields up to 8%. Coinbase has offered on-chain lending through Morpho for over a year but acts as a distributor, not a curator.
Morpho co-founder and CEO Paul Frambot clarified the distinction: "Exchanges like Coinbase offer Morpho vaults to their users... It does not manage the onchain strategies itself. Bitwise is joining Morpho as a curator, they will directly curate non-custodial vault strategies onchain."
The article concludes by noting that while vaults offer transparency and automation, DeFi lending carries risks including smart contract vulnerabilities and collateral liquidations. Unlike traditional financial products, on-chain vaults are not insured.
