Asset manager Bitwise has launched its first on-chain vault through the Morpho protocol, deploying USDC into overcollateralized lending markets with a target yield of up to 6%. The launch—reported by The Block on April 9, 2025—places the product directly on the Ethereum blockchain using the Morpho Blue protocol. Bitwise says the vault initially focuses on USDC and may expand to other stablecoins and crypto assets over time.
Overview of Bitwise On-Chain Vault Launch
The new Bitwise vault is an on-chain product that routes USDC into lending markets built on Morpho Blue, a permissionless meta-layer designed for peer-to-peer lending. By targeting up to 6% yield, the vault aims to capture interest paid by borrowers while using overcollateralization as a primary safety mechanism. This launch represents a strategic entry by a traditional asset manager into active, on-chain yield strategies and is positioned as a bridge for regulated institutional capital into DeFi lending markets.
How the Vault Operates
The vault runs on the Ethereum blockchain and leverages the Morpho Blue protocol to access isolated, custom lending markets. Morpho Blue functions as an efficient layer for matching lenders and borrowers, while the vault supplies USDC to those markets to earn interest. All loans in these markets are overcollateralized, which means borrowers must lock crypto assets worth more than their loans; this design reduces default risk for depositors and is central to how the vault seeks to preserve capital.
Expert Insights and Future Plans
Jonathan Man, Head of Multi-Strategy Solutions at Bitwise, confirmed the product’s initial USDC focus and said the vault "may support other stablecoins and crypto assets in the future." He also outlined broader plans for on-chain expansion, including potential strategies such as real-world asset (RWA) tokenization and providing liquidity to decentralized exchanges. These steps indicate Bitwise’s intent to build a suite of on-chain offerings beyond a single lending product.
Risks and Benefits
The vault combines a set of trade-offs typical for institutional DeFi products. Below are the main risks Bitwise and depositors face, followed by the key benefits the structure aims to deliver.
- Primary risks: smart contract vulnerabilities in protocol or vault code, collateral liquidation at unfavorable prices, and yield variability tied to borrowing demand.
- Benefits: potential for higher yield compared with some traditional instruments, use of a regulated stablecoin (USDC) for value stability, and risk management through overcollateralization and institutional governance.
Market Impact and Future Outlook
Bitwise’s vault acts as a proof-of-concept for asset managers considering on-chain yield products and could influence how other firms structure permissionless DeFi offerings. The firm’s stated interest in supporting additional stablecoins and exploring RWA or DEX strategies suggests a phased approach: start with a straightforward lending product, then add more complex capabilities as institutional comfort grows. For context on other yield products and stablecoin infrastructure, see Falcon Finance vault and stablecoins as infrastructure.
Why this matters
For a miner operating anywhere from a single device to a small farm in Russia, this announcement does not change mining operations directly, but it can affect how institutional capital flows into DeFi. If you hold USDC or consider converting mined revenue into stablecoins, new institutional products like this can expand where those holdings can be deposited for yield. At the same time, the product’s emphasis on overcollateralization and institutional controls indicates a focus on capital preservation rather than speculative exposure.
What to do?
If you mine and keep part of your proceeds in stablecoins, consider these practical steps: first, learn the product basics—understand it uses USDC on Morpho Blue and targets up to 6% yield. Second, assess custody and counterparty preferences: non‑custodial vs custodial setups carry different operational risks. Third, factor in smart contract and liquidation risks before moving funds; small-scale miners should diversify holdings rather than placing all proceeds into a single on-chain product.
Finally, track Bitwise’s announcements about other supported assets and services to decide if future offerings—such as RWA tokenization or DEX liquidity—fit your goals. For more on stablecoin support developments, you can read about Monad adds USD1.
