Olivia Capozzalo & Camila Russo
January 27, 2026

gm Defiers!

Today’s big story:

DeFi vault deposits have been steadily climbing over the past few months, rebounding sharply from the losses of the Balancer and Stream exploits.

In other news:

TradeXYZ volumes, OI hit new ATHs
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The Defiant’s 2025 in review:

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📈 Markets in the Past 24 Hours

TICKER	VALUE	24H
Bitcoin	$88,586	1.00 %
Ethereum	$2,984.89	2.57 %
BNB	$893.57	2.34 %
XRP	$1.91	-0.86 %
Solana	$126.25	1.56 %

Today’s Big Story

DeFi Vaults are Back and Institutions are Paying Attention

There’s a quiet comeback story in vaults. According to Token Terminal, average weekly vault deposits have been steadily climbing over the past year, rebounding sharply from the losses of the Balancer and Stream exploits.

Vault deposits in Morpho and Spark crossed $6 billion during the week of Jan. 6, the highest since their all-time high of $6.57 billion in October last year, according to Token Terminal data (which only tracks vault AUM for those two protocols).

Morpho and Spark Vault Deposits

This week, two announcements helped crystallize the evolution of this corner of DeFi. Bitwise introduced non-custodial vault curation on Morpho, marking a meaningful escalation in how traditional asset managers engage with DeFi. Rather than launching a new fund or ETF, Bitwise is curating on-chain vaults that investors can access directly, while retaining self-custody and full transparency over how capital is deployed.

And Kraken rolled out DeFi Earn, embedding vault-like strategies directly inside a centralized exchange interface.

Together, they signal that vaults are no longer a niche DeFi experiment. They’re becoming core financial infrastructure (as is DeFi).

Bitwise said in November that it expects on-chain vault assets under management to double this year.

What Are Vaults

Blockchain vaults are smart contracts that pool capital and deploy it across predefined strategies, most commonly lending and liquidity provision, while automating rebalancing, compounding, and risk constraints.

The closest TradFi analogy isn’t an ETF, but a separately managed account or prime brokerage mandate.

Vaults allow users to deposit their funds into a managed strategy, but unlike ETFs or mutual funds, they don’t track an index, don’t batch subscriptions and redemptions, and don’t rely on custodians or transfer agents. Instead, capital moves 24/7, positions are transparent and auditable block by block, and deposits are non-custodial.

Curation Matters

The defining innovation of this cycle is risk curation. Modern vaults are no longer “set and forget” strategies. Professional curators, firms like Gauntlet, Chaos Labs, Steakhouse Financial, Re7, and now Bitwise, define vault strategies and risk parameters, including exposure limits, asset whitelists, leverage caps, and unwind conditions.

This mirrors how asset management works off-chain: portfolio managers make allocation decisions; risk teams define guardrails. The difference is that in DeFi, positions should be visible to everyone – at least in theory.

Bitwise’s move onto Morpho matters precisely because of this model. Rather than abstracting DeFi away behind a black box, Bitwise is leaning into transparent, non-custodial infrastructure.

Hopefully, the market internalized why Stream failed. Stream bundled strategies without granular disclosure. Users discovered too late that an undisclosed “external fund manager” had lost $93 million in opaque investments.

The vaults attracting capital today should be explicit about trade-offs: how yield is generated, what risks are taken, and what happens in stress scenarios.

Morpho Takes the Lead

If vaults continue drawing institutional interest, Morpho is especially well-positioned as the protocol has long focused on being a neutral platform for permissionless, isolated markets, managed by curators. Token Terminal data shows Morpho vaults dominating net new deposits.

Now Bitwise’s endorsement helps solidify its position at the center of institutional on-chain lending.

Kraken and distribution

At the same time, Kraken is attacking the problem from the opposite direction: distribution. Its new DeFi Earn product uses Veda, Sentora and Chaos Labs as Risk managers who then deposit into Morpho, Aave and Sky, among others. This program makes vaults accessible via a centralized exchange interface, allowing users to access on-chain yield without touching wallets or smart contracts.

Together, Kraken and Bitwise illustrate how asset managers and exchanges can offer DeFi vaults to both institutions and retail.

Regulation may help, not hurt

Ironically, regulation that restricts stablecoin issuers from paying yield directly could accelerate vault adoption. If yield can’t live inside the token, it has to live somewhere else. Vaults, with explicit risk, disclosures, and curators, become the natural outlet.

The next bottleneck is standardization: independent risk ratings, comparable disclosures, and clearer benchmarks. As yield competition heats up, curators will be tempted to take more risk. Without shared frameworks, the industry risks repeating old mistakes.

With love,

Cami, founder of The Defiant

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🎬WATCH

How Stablecoins Are Rewiring Global Payments | Borderless CPO Alex Garn

In this episode of The Defiant Podcast, Chris Storaker sits down with Alex Garn, chief product officer at Borderless, to unpack how stablecoins are quietly transforming cross-border payments — and what it actually takes to move money at scale across jurisdictions.

We explore why stablecoins are moving beyond trading and DeFi collateral into real-world enterprise payments, where they already outperform legacy rails on settlement speed, transparency, and custody — especially across emerging market corridors like Latin America and Southeast Asia.

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