DeFi is no longer a playground for crypto-native innovators alone, it’s becoming a strategic frontier for institutions. In 2025, Ethereum treasury companies are rewriting the rules of yield generation, using DeFi protocols not just to stake ETH, but to actively grow it.

Backed by major players like Standard Chartered and armed with strategies well beyond traditional finance, these companies could be the quiet catalyst behind DeFi Summer 2.0.

Here’s a closer look at how they’re doing it, and why it matters.

Executive Summary

The market is undergoing a historic transformation as Ethereum treasury companies, businesses that actively manage ETH and other Ethereum-based assets as part of their corporate balance sheets, officially enter the DeFi ecosystem. Standard Chartered has formally declared that ETH treasury companies represent a superior investment opportunity compared to ETH ETFs, with both groups purchasing 1.6% of total ETH supply since June. Cosmos Health has allocated 72.5% of its $300 million raise to an Ethereum treasury strategy, while ETHZilla emerged with $425 million in funding from 60 institutional and crypto-native investors, including Polychain Capital and GSR. These organizations are pursuing 8-14% yields instead of the traditional 3-5% from staking, with the DeFi market projected to reach $1,558.15 billion by 2034.

DeFi Summer 1.0 vs. 2.0: Retail Hype to Institutional Strategy

The first DeFi Summer in 2020 was defined by experimental protocols, high-risk yield farming, and retail-driven hype. Platforms like Compound, Yearn, and SushiSwap offered triple-digit APYs, often paid in governance tokens with questionable long-term value. Liquidity was volatile, protocol risks were poorly understood, and capital efficiency was low.

In contrast, DeFi Summer 2.0 in 2025 is driven by structured capital from Ethereum treasury companies. These are institutions that seek real yield, operate under regulatory oversight, and leverage infrastructure like EigenLayer, Aave, and Curve with advanced tooling. The shift is not just in capital size, it’s in discipline, sustainability, and risk modeling.

ETH Treasury vs. ETH ETF: Passive vs. Active Strategy

ETH ETFs offer simple exposure to Ethereum’s price, but they stop there. Managed within traditional finance, these funds don’t participate in staking or yield generation. They are passive by design.

ETH treasury companies, on the other hand, actively use ETH as working capital. They stake, lend, restake, and provide liquidity across DeFi protocols to generate real returns.

Market Context and Institutional Trend Analysis

Transition from Experimentation to Institutionalization

Many decentralized finance (DeFi) protocols are no longer experimental. The underlying infrastructure operates effectively, and recent regulatory developments are making participation suitable for institutions. This transformation is driven by client demand for higher yields and portfolio diversification only available through decentralized protocols.

Augustine Fan, founding partner of SOFA, shares his view that 2025 will mark the beginning of a new era for institutional adoption in crypto, with DeFi playing a pivotal role in reshaping traditional finance. The incoming administration has filled its cabinet with crypto-friendly appointments, ushering in a year of long-awaited reforms and regulatory clarity on crypto policies.

Standard Chartered’s Strategic Endorsement

Standard Chartered suggests that ETH treasury companies may offer better returns and staking gains, with their endorsement highlighting a shifting dynamic in institutional Ethereum investment. This analysis comes at a time when approximately 12 public companies hold over 1 million ETH, including BitMine Immersion Technologies, Coinbase, and Bit Digital.

The shift has been fueled by client demand for higher yields and greater portfolio diversification only available through decentralized protocols. Banks that previously resisted the DeFi revolution now find themselves rapidly developing capabilities to remain competitive and relevant in the evolving financial landscape.

Market Growth and Projections

The DeFi market has witnessed rapid growth in recent years, driven by the global push for financial inclusion, growing interest in cryptocurrencies, and increasing adoption of blockchain technology. The U.S. DeFi market size was $5.84 billion in 2024 and is projected to reach approximately $441.15 billion by 2034, growing at a CAGR of 54.10% from 2025 to 2034.

Competitive Strategies of Leading ETH Treasury Companies

GameSquare Holdings: Algorithmic Optimization Model

GameSquare Holdings currently ranks sixth among ETH treasury holdings, having established a target of generating 8-14% annual returns from Ether assets. The company has partnered with Dialectic, a Swiss cryptocurrency investment firm, to scale their ETH treasury to $250 million.

Rhydon Lee, advisory board member at GameSquare, characterizes the 3% returns from ETH staking as equivalent to risk-free returns, comparable to Treasury bond investments in traditional finance. However, GameSquare has established significantly more ambitious targets through diversified investments across the Ethereum ecosystem, including NFTs, Web3 gaming, prediction markets, and stablecoins.

Dialectic operates the Medici algorithmic trading system, which monitors successful yield farming operations and automatically executes hundreds of positions simultaneously. This system allocates assets based on specific parameters and smart wallet analysis, creating significant competitive advantages in yield optimization.

ETHZilla: Market-Making Breakthrough with Substantial Funding

ETHZilla emerged with $425 million in private funding from 60 institutional and crypto-native investors, including Polychain Capital, Electric Capital, GSR, and founders of major Ethereum-based platforms like Lido, Frax, and EigenLayer. The company plans to use the bulk of funds to accumulate ether (ETH) as its core treasury asset and generate higher yields than traditional staking.

Electric Capital will serve as ETHZilla’s external asset manager. The company will leverage its holdings through an on-chain yield generation program combining staking, lending, and liquidity provisioning. ETHZilla will also launch with a “DeFi Council” composed of Etherealize and other DeFi players to provide input on optimizing ETH treasury monetization.

Cosmos Health: Healthcare Sector Pioneer

Cosmos Health Inc. has made a notable move in the corporate finance landscape by allocating up to $300 million toward an Ethereum treasury strategy, marking the first time a U.S. healthcare company has made such a significant investment in cryptocurrency.

ETH assets will be custodied and staked through institutional infrastructure provided by BitGo Trust Company, Inc. The treasury initiative complements Cosmos Health’s ongoing digital transformation and e-commerce efforts, with potential to explore blockchain use cases in supply chain traceability, wellness incentive programs, and global consumer engagement.

CEO Greg Siokas described the initiative as a “strategic milestone” and broader commitment to innovation, emphasizing that the move provides direct Ethereum exposure for shareholders while supporting growth across product development and commercial expansion.

BTCS: Long-Standing Experience and Leverage Strategy

BTCS, the oldest publicly traded cryptocurrency company in the United States since 2014, has transitioned from Bitcoin mining to Ethereum infrastructure. CEO Charlie Allen reports that operating independent validator nodes or utilizing Rocket Pool generates approximately 40% higher returns compared to third-party staking services.

The company has implemented a leverage strategy by depositing $100 million in ETH to Aave, borrowing USDT against ETH collateral and using these funds to purchase additional ETH for staking, creating a compound growth cycle. This “flywheel” strategy allows BTCS to maximize capital efficiency while maintaining Ethereum exposure.

SharpLink Gaming: Integration and Expansion

SharpLink has added $265 million in ETH to its holdings. The company now has 521,939 Ethereum worth nearly $1.9 billion. John Chard, Vice President of Operations at SharpLink, positions selective DeFi participation as a natural progression beyond staking, leveraging Ethereum infrastructure not only for value preservation but also for active value creation.

Chard predicts that as increasing numbers of corporations adopt ETH as balance sheet assets, they will recognize that DeFi represents not merely an experiment but a genuine competitive advantage in portfolio management.

In-Depth Analysis of Institutional Yield Farming

Yield Trends and Technology

Compared to traditional finance, yield farming offers significantly higher returns because it eliminates middlemen, operates 24/7 through automation, and often includes token incentives to attract liquidity. While a bank savings account might pay 0.5-2% annually, even conservative DeFi strategies regularly deliver 5-15% APY.

At its core, yield farming is a way for crypto holders to lend or stake their assets in DeFi protocols in exchange for rewards. These rewards typically come in the form of additional crypto tokens, much like earning interest or dividends in traditional finance.

Infrastructure and Optimization Tools

The best yield farming tools and platforms in 2025 balance high potential returns with security, usability, and transparency. DeFi yield farming platforms play a crucial role in the ecosystem, offering users a variety of options to maximize earnings and manage risk.

Balancer allows customizable asset weights, providing greater flexibility in exposure management while earning fees. DefiLlama Yields tracks yields across hundreds of protocols, enabling real-time APY comparisons and filtering opportunities by chain, risk level, or asset type.

Risk Management and Compliance

Yield farming has mostly operated in a Wild West environment—but that’s changing as regulators start paying closer attention to DeFi. Stronger KYC/AML Requirements: Platforms may introduce identity verification for compliance (some Aave markets already do this).

Institutional investors, who are typically among the largest participants in traditional money market funds, are therefore not allocating to these products. Institutional investors, including pensions, endowments, sovereign wealth funds, and insurance firms, are not moving because the legal enforceability of crypto assets and smart contracts is still unclear.

Risk Assessment and Management Framework

Liquidity Risk and Volatility

Bernstein warns that even ETH staking for network security presents greater management complexity and risk exposure for treasury companies compared to Bitcoin holdings alone. Liquidity issues from uncertain un-staking queue durations and smart contract risks in DeFi require professional management.

Newer digital assets with low liquidity often have extreme price fluctuations. Although volatility can be a good thing, it can also cause users to lose money. Since yield farm platforms often require users to lock their cryptocurrency tokens for a predetermined period, there is a chance the price will drop significantly before users can sell.

Optimal Risk Management Methods

Lee acknowledges that pursuing higher DeFi yields necessitates accepting elevated risk profiles, but recommends that well-operated companies should not allocate more than 30 basis points of assets to any single protocol to minimize risks from liquidation or protocol attacks.

Allen predicts some companies will face bankruptcy, but BTCS plans to mitigate risks by maintaining loan-to-value ratios below 40% and utilizing established platforms like Aave. This strategy balances profit maximization with capital protection in adverse market conditions.

Currency Mismatch and Systemic Risk

Lee argues that the greatest threat to publicly traded companies involves currency mismatch between USD debt and crypto assets during periods of high market volatility. This is particularly critical for companies raising USD capital to invest in ETH, as this mismatch can create systemic risks under stressed market conditions.

Market Impact Analysis and Valuation

Impact on DeFi Tokens

Beyond Ethereum itself, treasury adoption is starting to influence DeFi token markets, especially those tied to established protocols like Aave, Maple, and Maker. DeFi lending and borrowing giant Aave currently maintains over $50 billion in total value locked, exceeding Standard Chartered’s projections for total ETH accumulation by treasury companies.

However, the impact stems not only from quantity but also from liquidity quality. Institutional adoption has brought unprecedented liquidity to DeFi protocols, with established blue-chip platforms like Aave, Maple, and Maker benefiting from their multi-year track records of secure operation at scale.

Legitimacy and Market Education

Chard indicates that ETH treasury companies will demonstrate in real-time that on-chain finance can outperform traditional methodologies. This extends beyond sustainable, long-term liquidity from institutionally managed actors. While initial decentralized finance cycles were driven by grassroots innovation and experimentation, this next advancement will be shaped by regulatory clarity, security frameworks, and traditional financial infrastructure integration.

Keys emphasizes that every quarterly report and earnings call will become opportunities to educate traditional markets about DeFi fundamentals, explaining Aave, staking, and restaking from an institutional perspective. This creates a positive cycle where institutional adoption leads to better education, thereby driving broader adoption.

Future Forecasts and Outlook

Market Projections

Roughly 50% of participants in a Myriad Markets prediction market say that Ethereum will breach $5,000 by the end of 2025. This forecast is supported by increasing institutional adoption and increasingly sophisticated yield optimization strategies.

North America dominated the decentralized finance market with the largest share in 2024 due to the early adoption of blockchain innovations and a well-established technological infrastructure. This leadership is further cemented by prominent institutional partnerships and integration with conventional finance systems.

Sustainable Yield Strategies

The sustainability of yield farming, a popular DeFi activity, will come under scrutiny in 2025. As the market matures, there will be a shift towards more sustainable yield farming practices that focus on long-term value creation rather than short-term gains.

This trend will likely result in the development of yield farming strategies that are less reliant on high inflationary token rewards and more focused on providing consistent, stable returns.

Hybrid Financial Products

Expect hybrid financial products that merge DeFi’s efficiency with traditional banking security. The integration of traditional finance (TradFi) with DeFi is likely to become more prominent in 2025. Financial institutions will increasingly explore hybrid models that combine the benefits of DeFi with the stability and trust of traditional finance.

Conclusion: The Future of Institutional DeFi

Raman values the institutional legitimacy that Ethereum is receiving. Asset allocation and use case presentation demonstrate that protocols have been battle-tested and possess good resilience capabilities, able to achieve real volume and scale.

Treasury participation can drive the next phase of on-chain growth, delivering legitimacy, volume, and new forms of capital coordination. Unlike previous DeFi cycles driven by grassroots innovation and experimentation, this phase will be shaped by regulatory clarity, security frameworks, and traditional financial infrastructure integration.

Lee concludes that this trend will benefit pricing, but emphasizes the importance of maintaining sustainable activity rather than temporary speculation. The most successful yield farmers in 2025 aren’t chasing the highest advertised APYs, they’re building sustainable strategies across multiple chains and protocols, with careful attention to underlying token fundamentals and platform security.

The emergence of Ethereum treasury companies represents a critical inflection point in DeFi history. With backing from leading financial institutions like Standard Chartered, increasing regulatory clarity, and adoption from traditional sectors like healthcare, DeFi Summer 2.0 is not merely a possibility but an ongoing reality. The future of decentralized finance is being written by players with institutional scale and vision, promising to bring a new era of innovation and growth to the blockchain ecosystem.