Bitwise Launches DeFi Vaults on Morpho Protocol Targeting 6% USDC Yield

TLDR

• Bitwise Asset Management launched its first onchain vault strategy through DeFi lending protocol Morpho, targeting up to 6% annual yield on USDC stablecoin
• The vault strategy uses over-collateralized lending markets, with Bitwise managing strategy design and risk management while funds remain non-custodial
• Bitwise portfolio manager Jonathan Man leads the initiative, with plans to expand to other stablecoins and DeFi strategies in the future
• Morpho ranks as the seventh-largest DeFi platform with $6.7 billion in total value locked, growing from $3.2 billion at the start of 2025
• Bitwise previously predicted onchain vaults would double in assets under management in 2026, calling them “ETFs 2.0”

Bitwise Asset Management announced Monday it has launched its first onchain vault strategy through Morpho, a decentralized lending protocol. The move marks Bitwise’s entry into the DeFi market as a vault curator.

The initial vault targets up to 6% annual percentage yield on USDC stablecoin. It works by deploying capital into over-collateralized lending markets on Morpho’s platform.

Jonathan Man serves as Bitwise’s portfolio manager and head of multi-strategy solutions for the vault operations. He told The Block that other major stablecoins and crypto assets could be supported in future strategies.

Bitwise will manage the curation, strategy design and risk management for the vaults. The funds remain non-custodial and held onchain through smart contracts.

Users can deposit or withdraw their funds at any time. This differs from certain staking protocols that lock funds for set periods.

The vaults function like a portfolio of lending positions. Smart contracts automatically allocate capital within predefined risk limits set by Bitwise.

Man said the structure aims to make DeFi more accessible to investors. Many investors want exposure to onchain yield but find managing risk parameters too complex.

DeFi Vaults Growing Rapidly

Bitwise published a report last month predicting onchain vaults would double in assets under management in 2026. The firm described these products as “ETFs 2.0.”

Vaults grew from less than $100 million to $2.3 billion in assets during 2024. Interest accelerated in 2025, with assets reaching a peak of $8.8 billion.

Market volatility in October 2025 exposed weak risk management across some vault strategies. This led to losses and outflows from the sector.

Bitwise said the pullback was a necessary reset. The firm believes higher-quality vault curators will attract fresh capital in the next growth phase.

Morpho co-founder and CEO Paul Frambot said the Bitwise partnership is an important step for Morpho’s infrastructure positioning. “Excited to see the vault curation model continue to scale, with the largest financial institutions in the world leaning in,” Frambot said on X.

Morpho ranks as the seventh-largest DeFi platform by total value locked with $6.7 billion. The protocol started 2025 with around $3.2 billion in TVL.

The platform partnered with Coinbase in January 2025 to launch Bitcoin-backed loans. This pushed TVL to around $4 billion by the end of that month.

An attempted exploit on Morpho in April caused TVL to fall to around $2.5 billion. The attack was halted before any funds were lost.

Other Major Players Enter Space

Platform adoption grew rapidly after the April incident. Morpho’s TVL surged to as high as $8.5 billion in November following partnerships with Crypto.com and Société Générale’s digital-asset subsidiary SG-FORGE.

Morpho also announced this week that its curated vaults from Sentora were integrated with Kraken’s DeFi earn program. Kraken separately launched a new “DeFi Earn” product built on vault infrastructure from Veda, targeting yields of up to 8%.

Coinbase has offered onchain lending through Morpho for more than a year. Frambot clarified that Coinbase does not act as a vault curator.

Morpho still trails behind Aave, the industry leader in DeFi lending, which has a total value locked of more than $34 billion.

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