- Asset management firm Bitwise has integrated with Vaults to offer curated strategies for onchain lenders.
- The strategy targets an APY of up to 6% for institutional investors.
Bitwise Asset Management, the world’s largest crypto index fund manager, unveiled a new non-custodial vault curation solution for onchain investors. On Monday, it announced integration with Vaults, an institutional onchain lending network powered by Morpho’s open infrastructure for lenders and borrowers.
Bitwise’s Integration with Morpho’s Vaults
Jonathan Man, CFA, Portfolio Manager and Head of Multi-Strategy Solutions and DeFi Strategies at Bitwise, noted that decentralized finance (DeFi) offers better yield opportunities that typically exceed those of traditional finance (TradFi). However, it also suffers from insufficient risk management protocols, which keep many investors at bay.
Vaults aims to address these issues with expert-curated mechanisms targeting a high annual percentage yield and enhanced transparency. Meanwhile, it leverages Morpho’s overcollateralized and frictionless DeFi pools.
“Decentralized finance, or DeFi, offers compelling yield opportunities, but the complexity of managing onchain risk has kept many investors on the sidelines,” said Man, “Bitwise provides value-add by layering professional guidance and risk management experience onto these non-custodial tools.”
Expert Curation
Bitwise provides curation, strategy, and real-time risk management to the platform. The asset manager’s 140-person team of technology and investment professionals, led by Man, will carry out tasks such as linking investors to the safest lending markets.
6% APY with Heightened Transparency
Bitwise’s solutions for Vaults also include online lending strategies targeting an APY of up to 6%. It functions similarly to a portfolio of lending positions or a money market fund without banks in the middle and with elevated transparency for market participants.
Non-Custodial Solution
The non-custodial approach means users keep their keys. Vaults can only determine the best lending deals and smart contracts move customers’ money based on Bitwise’s strategy. However, users can withdraw their funds at any time without the asset manager’s permission.
In short, Vaults links users to Bitwise’s professional management tools without giving up control of their funds. Additionally, it departs from conventional professional management procedures, in which customers are at the mercy of bank or TradFi’s high-friction custodial systems.
Investment in Overcollateralized Lending Pools
Vaults invests in overcollateralized lending pools on Morpho. In DeFi, overcollateralization is a lending strategy in which the value of the pledged collateral exceeds the principal amount of a loan. The mechanism reduces credit risks, including borrower default or a decline in collateral value.
Addressing a Growing Institutional Demand
Paul Frambot, Co-founder and CEO of Morpho, stated that their partnership with Bitwise underscores the growing institutional demand for allocating capital onchain through non-custodial infrastructure.
“Morpho Vaults are built for institutional use, enabling professionally defined risk parameters to be expressed directly onchain and making them the perfect foundation for Bitwise’s entry into vault curation,” Frambot commented. “As major institutions like Bitwise recognise the value in diversified fixed-income strategies in digital assets, vaults are emerging as a core building block of onchain finance strategies.”
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