Bitwise Onchain Vaults Launch via Morpho: Revolutionary 6% APY Strategy Transforms DeFi Access

Digital asset management leader Bitwise has announced a groundbreaking partnership with decentralized finance protocol Morpho to launch non-custodial onchain vaults, targeting a 6% annual percentage yield through overcollateralized lending strategies. This development, announced on Monday, December 15, 2025, represents a significant evolution in how institutional and retail investors access decentralized finance yield opportunities while maintaining full control of their assets.

Bitwise Onchain Vaults: A New Era for DeFi Accessibility

Bitwise’s collaboration with Morpho introduces professionally managed onchain vaults that combine institutional-grade risk management with decentralized finance infrastructure. The initial vault strategy focuses on overcollateralized lending pools, where borrowers must deposit collateral exceeding their loan value. This approach significantly reduces counterparty risk while generating sustainable yield. According to Bitwise’s announcement, these vaults operate entirely onchain, providing complete transparency into asset allocation and performance metrics.

Jonathan Man, Bitwise portfolio manager and head of multi-strategy solutions, leads the firm’s curation, strategy, and risk management for these vaults. His team will deploy multiple strategies across different vaults on the Morpho protocol. This professional management layer addresses a critical gap in DeFi accessibility, where sophisticated strategies typically require technical expertise beyond most investors’ capabilities.

The Infrastructure Behind the Innovation

Morpho’s protocol architecture enables these vaults through its unique peer-to-pool lending model. Unlike traditional lending protocols, Morpho optimizes capital efficiency by matching lenders and borrowers directly when possible, while falling back to pooled liquidity when necessary. This hybrid approach potentially offers better rates than purely pooled alternatives. The protocol’s smart contracts have undergone extensive security audits, with over $6.7 billion in total value locked as of December 2025, according to DeFiLlama data.

Onchain Vaults as “ETFs 2.0”: Bitwise’s Vision for 2026

Bitwise recently published research forecasting that onchain vaults will double their assets under management in 2026, dubbing them “ETFs 2.0.” The firm’s report positions these vaults as the next evolution of investment vehicles, combining the accessibility of exchange-traded funds with the transparency and efficiency of blockchain technology. According to Bitwise’s analysis, vaults function as “onchain investment funds” where users simply deposit assets, while professional curators manage yield generation across decentralized finance protocols.

The report predicts: “We believe a wave of high-quality curators will enter the market in 2026, drawing billions of dollars of capital into the vaults they manage. The space will grow so fast it’ll catch the attention of major financial publications.” Bitwise specifically anticipates that Bloomberg, The Wall Street Journal, or the Financial Times will label vaults as “ETFs 2.0” within the coming year, signaling mainstream financial recognition.

Key Advantages Over Traditional Yield Products

Bitwise’s onchain vaults offer several distinct advantages compared to traditional yield products:

• Non-custodial structure: Users maintain control of their private keys and can withdraw funds at any time
• Transparent operations: All transactions and strategies are visible on the blockchain
• Professional management: Institutional-grade risk assessment and strategy execution
• 24/7 accessibility: No market hours restrictions or settlement delays
• Lower barriers: Access to sophisticated strategies without technical expertise

Morpho’s Strategic Positioning in the DeFi Landscape

Morpho has experienced remarkable growth throughout 2025, beginning the year with approximately $3.2 billion in total value locked and reaching as high as $8.5 billion in November. This growth trajectory followed strategic partnerships with major platforms including Coinbase, Crypto.com, and Société Générale’s digital-asset subsidiary SG-FORGE. Despite this impressive expansion, Morpho remains significantly smaller than industry leader Aave, which commands over $34 billion in total value locked.

Paul Frambot, Morpho co-founder and CEO, commented on the partnership: “This development represents an important step for Morpho’s infrastructure positioning. We’re excited to see the vault curation model continue to scale, with the largest financial institutions in the world leaning in.” The Morpho team emphasized that their protocol’s infrastructure enables professional managers like Bitwise to create sophisticated yield products while maintaining the core DeFi principles of transparency and user control.

Security and Risk Management Protocols

Morpho’s security framework has been tested throughout 2025, including an attempted exploit in April that was successfully halted before any funds were lost. The protocol’s response demonstrated robust security measures and rapid incident response capabilities. For Bitwise’s vaults, additional risk management layers include:

• Multi-signature governance for critical operations
• Continuous smart contract monitoring and auditing
• Insurance coverage through decentralized protection protocols
• Real-time risk parameter adjustments based on market conditions

The Competitive Landscape: How Bitwise Vaults Compare

The DeFi yield generation space has evolved significantly since its inception, with various approaches competing for user capital. The table below compares Bitwise’s onchain vaults with alternative yield generation methods:

Bitwise’s approach uniquely combines the professional management of traditional finance with the technological advantages of decentralized protocols. This hybrid model addresses common concerns about DeFi accessibility while maintaining the core benefits of blockchain-based finance.

Regulatory Considerations and Compliance Framework

The launch of professionally managed onchain vaults occurs within an evolving regulatory landscape for digital assets. Bitwise has structured its vaults to comply with existing financial regulations while leveraging DeFi’s technological advantages. The non-custodial nature of these products places them in a distinct regulatory category compared to traditional managed funds. Users maintain control of their assets at all times, with Bitwise providing strategy execution rather than asset custody.

This structure potentially offers regulatory advantages while maintaining user protection. The transparent, onchain nature of all transactions provides regulators with unprecedented visibility into fund operations. Additionally, the overcollateralized lending strategy employed in the initial vault significantly reduces risk compared to undercollateralized or algorithmic stablecoin approaches that have faced regulatory scrutiny.

Integration with Traditional Finance Infrastructure

Bitwise’s vaults represent a bridge between traditional finance and decentralized protocols. The firm’s existing relationships with institutional investors, regulatory expertise, and compliance infrastructure enable broader adoption than purely native DeFi projects might achieve independently. This integration extends to tax reporting, compliance documentation, and institutional-grade security protocols that meet traditional finance standards while operating on decentralized infrastructure.

Conclusion

Bitwise’s launch of onchain vaults via Morpho represents a significant milestone in the maturation of decentralized finance. By combining professional asset management with non-custodial DeFi infrastructure, these vaults address critical accessibility barriers while maintaining blockchain’s core advantages of transparency and user control. The targeted 6% APY through overcollateralized lending strategies offers a compelling yield opportunity with managed risk profiles. As Bitwise predicts vault assets will double in 2026 and mainstream financial publications begin recognizing them as “ETFs 2.0,” this development may signal a broader institutional adoption of onchain finance infrastructure. The success of these Bitwise onchain vaults could establish a new standard for how both retail and institutional investors access yield in the evolving digital asset landscape.

FAQs

Q1: What are Bitwise’s onchain vaults and how do they work?
Bitwise’s onchain vaults are non-custodial investment vehicles that use the Morpho DeFi protocol to generate yield through overcollateralized lending strategies. Users deposit assets into smart contract vaults, where Bitwise’s professional team manages yield generation while users maintain control of their funds.

Q2: How does the 6% APY target compare to other yield options?
The 6% target APY positions Bitwise’s vaults competitively between traditional savings products (0.5-4%) and higher-risk DeFi protocols (5-15%). This rate reflects the overcollateralized, professionally managed approach that balances yield generation with risk management.

Q3: What makes these vaults “non-custodial” and why is that important?
Non-custodial means users retain control of their private keys and can withdraw assets at any time without intermediary approval. This eliminates counterparty risk associated with centralized platforms while providing the transparency of blockchain-based operations.

Q4: How does Morpho’s protocol contribute to these vaults’ functionality?
Morpho provides the underlying lending infrastructure through its peer-to-pool model, which optimizes capital efficiency. The protocol’s smart contracts enable the vault operations, while Bitwise adds professional strategy management and risk assessment layers.

Q5: What security measures protect assets in these onchain vaults?
Security measures include overcollateralization requirements, continuous smart contract auditing, multi-signature governance for critical operations, decentralized insurance options, and professional risk monitoring by Bitwise’s experienced team.