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The US government holds 198,000 BTC - imagine the yield potential if these reserves were invested in DeFi instead of being sold.
Bitcoin is often referred to as the best store of value by some people worldwide, likened to digital gold that rewards patient investors over time. But what happens when a considerable portion of this asset just goes away? In early 2025, analysis by Glassnode suggests that over 62% of the circulating Bitcoin supply has remained unchanged for more than a year.
These so-called dormant Bitcoins remain locked within wallets, the majority of which belong to long-term holders, inactive users, or wallets whose keys have been lost forever.
This gigantic yet quiet segment of Bitcoin brings up the serious question of whether decentralized finance (DeFi) protocols can resurrect dormant BTC somehow.
Glassnode data indicate that nearly 2 out of every 3 BTC are left idle for over a year, with no on-chain activity. While some are being strategically stored for cold storage by institutions or early holders, others are simply forgotten, locked away due to lost private keys or forever trapped in estate limbo.
Inactivity is somehow positive because a lower circulating supply will rise in tandem with the rising price due to scarcity. But it does come with increased illiquidity, meaning a large portion of the network's funds are not contributing to innovations, DeFi growth, or yield generation.
62% of the active Bitcoin supply is dormant.
198,000 BTC is held by the U.S. government.
$106.39 billion Bitcoin ETFs with over 5.7% of total market cap as of April 23, 2025.
Approximately $4 billion in BTC is currently locked in DeFi protocols.
DeFi has carved out its name as one of the most significant crypto innovations so far, unveiling a plethora of new financial applications for assets. Now its gaze is trained on Bitcoin.
Wrapped and bridged versions of Bitcoin, such as WBTC, tBTC, or BTC.b, have opened the possibility of Bitcoin being usable in the DeFi ecosystems running on Ethereum, Solana, and Avalanche. With DeFi, dormant Bitcoins could be used for:
Passive yield generation via lending platforms
Liquidity provision in decentralized exchanges (DEXs)
Participation in staking and restaking protocols
Collateralizing loans and minting stablecoins
According to a report in DeFiLlama, Bitcoin worth more than $4 billion is currently in action in DeFi protocols. That is but a drop in the bucket compared to a $1.83 trillion market cap. Unlocking even the slightest portion of dormant BTC could provide cash flow for Bitcoin itself.
The United States government holds approximately 198,000 BTC, primarily seized from criminal investigations and darknet market operations. Instead of selling this reserve, which would impact the markets, some analysts propose a novel idea: reinvesting it in DeFi.
“Budget-neutral strategies with restaking dormant reserves could allow the U.S. to earn yield without affecting market equilibrium,” notes crypto economist Jameson Lo.
This would also set a precedent whereby other governments or institutions with significant reserves of BTC should use rather than sell.
As of now, that potential is marred by barriers: Security Risks- BTC Wrapping is a Custodial Risky, especially in the case of centralized ones.
Technical Friction - Not everyone who owns it is tech-savvy or eager to explore DeFi.
