Bitcoin is infrastructure, not digital gold

Opinion by: Thomas Chen, CEO of Function

Bitcoin exchange-traded funds (ETFs) have solved the access issue but remain passive. What is needed now are credible, auditable, institutional-grade pathways to convert Bitcoin exposure into scalable yield.

Bitcoin is evolving from a digital store of value into a form of productive capital. Continuing to treat Bitcoin (BTC) like digital gold — storing it for appreciation over the long term — misses its true opportunity as a reserve asset for the digital age.

Bitcoin isn’t simply a store of value; it is programmable collateral. It is productive capital. It is the base layer for institutional participation in onchain finance.

The liquidation event of Oct. 10 occurred due to the inability to execute a core risk-management function efficiently. On the other hand, this event also proved that Bitcoin yield projects emphasizing security and simplicity will win through. As volatility increased, Bitcoin yield projects saw an increase in arbitrage opportunities in the market as spreads widened. Market-neutral strategies that didn’t take on a lot of leverage were able to weather and actually outperform as they profited on the market dislocation.

Composable, capital-efficient infrastructure has evolved, and transparent and auditable yield pathways now exist. Institutional deployment frameworks have matured, both in technical and legal ways. Yet most of the Bitcoin held by institutions has the potential to offer far higher yields.

2025 Institutional Investor Digital Assets Survey. Source: Ernst & Young ## Bitcoin as productive capital

Strategy’s management team has been able to financially engineer BTC acquisition with finesse. The same may not hold for other BTC digital asset treasuries. Copytrading Strategy is not a strategy. Eventually, the BTC accumulation phase will come to an end, and the BTC deployment phase will begin.

Bitcoin DeFi’s total value locked (TVL) surged 228% in the past 12 months. Source: DefiLlamaIn traditional finance (TradFi) markets, allocators don’t park up their assets indefinitely. They rotate, hedge, optimize and continually adjust them to maximize yield (risk-adjusted). With Bitcoin, however, allocators are still in the accumulation phase, but eventually, like any other asset, they’ll need to start putting their Bitcoin to work.

What does that mean for allocators? It’s making Bitcoin work like productive capital with known and reliable frameworks. Think short-term lending that’s backed by substantial collateral. Furthermore, market-neutral basis strategies that are not dependent on Bitcoin’s price appreciation, supplying liquidity on vetted and compliant institutional platforms, and conservative or low-risk covered call programs with clear, preset risk limits.

Each pathway should be transparent and easy to audit. It should be configured for duration, counterparty quality and liquidity. The goal isn’t to maximize yield; it’s to optimize it to hedge volatility within the mandate. If the yield is too low relative to the risk profile, the risk/reward of deploying capital isn’t worth it for many, so some liquidity providers (LPs) hold.

What we need is an operating model that allows us to use it without violating compliance standards, all while keeping it simple. Once yield is safe and standardized, the bar shifts, averting the liability that capital becomes when idle.

By Q4 2024, over 36 million mobile crypto wallets were active globally. That’s a record high and a sign of a broader ecosystem engagement where retail is learning to transact, lend, stake and earn. A similar scenario is possible for institutions that hold significantly more capital and run under strict mandates. Many still regard Bitcoin only as a store of value, having not yet fully deployed its potential — and by doing so, in a fully compliant manner.

Turning exposure to deployment

Over $200 billion in Bitcoin is held by institutions, with 1.69 million BTC in ETFs and 60% in large wallets. Source: BitInfoCharts
There are plans to increase crypto allocations among institutional investors, specifically 83%, according to a 2025 survey. The allocation growth can only reach its full potential, however, if operational requirements are met with a solid infrastructure to support it.

The gears are already turning. Arab Bank Switzerland and XBTO are introducing a Bitcoin yield product as some centralized exchanges prepare to launch their own yield-bearing Bitcoin fund for institutional clients, granting access to structured BTC income.

These are early signals, not endorsements. What matters is the direction of travel: whether yield is delivered through creditworthy routes, with segregated assets and clear downside frameworks. Institutions want low-volatility income sourced from onchain mechanics, but wrapped in controls they already understand.

What’s happening here isn’t speculative; it’s foundational. Bitcoin is being built into a programmable infrastructure, adding further yield routes beyond its already strong reputation as “digital gold.” It’s no longer a niche interest and is being actively pursued by institutions seeking liquidity and low-volatility income strategies — only this time, they’re onchain.

A visible maturation of Bitcoin is taking place. It’s indeed a major structural trend where productive assets are winning allocation. What the market needs now is not more access; it’s more ways to use Bitcoin productively.

Compliant infrastructure compounds yield

Upgrading the standard to performance means defining success in terms that are measurable and quantifiable. Think in terms of realized versus implied yield, slippage and target drawdown tolerance — also, financing costs, collateral health and time to liquidity under stress.

When the tools exist to deploy BTC productively, adhering to institutional custody, risk management and compliance, the standard will upgrade and shift to performance. As doing nothing becomes the exception, Bitcoin’s role in the economy moves from passive allocation to productive, yield-bearing capital. Allocators will no longer be able to afford to sit idle.

Institutions that are quick to implement these changes in standards will secure the lion’s share of liquidity, structure and transparency that composable infrastructure offers.

The window to define best practice is already open.

It’s now time to formalize policy, launch small, auditable programs that scale and create more than just access. It’s time to turn exposure into deployment in a productive, transparent and fully compliant manner, and seize the full potential of Bitcoin.

Opinion by: Thomas Chen, CEO of Function.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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