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Bitcoin Updates: Institutional Investments in Bitcoin Face Challenges from DeFi’s Unused Liquidity and Security Issues

Bitcoin Updates: Institutional Investments in Bitcoin Face Challenges from DeFi’s Unused Liquidity and Security Issues

Bitget-RWA2025/11/25 06:46
By:Bitget-RWA

- DeFi faces $12B liquidity crisis with 95% capital unused, while Aerodrome Finance suffered DNS hijacking attacks exploiting front-end vulnerabilities. - Bitcoin's price drop below $90,000 triggered $1.425B ETF outflows, contrasting Harvard's $218M Bitcoin/gold investment as inflation hedge. - SEC accelerates crypto ETF approvals as Bitwise's XRP ETF launches, while Spark shifts focus to institutional infrastructure over retail apps. - Market turbulence highlights DeFi's security flaws and liquidity chall

The decentralized finance (DeFi) industry is currently grappling with significant obstacles, as $12 billion in liquidity remains unutilized,

, recent analyses reveal. Adding to these difficulties, Aerodrome Finance—a decentralized exchange operating on Coinbase’s Base network—experienced a front-end breach this week, to reroute users to fraudulent websites. Although the core smart contracts were not compromised, the event has intensified scrutiny over DeFi’s security measures. Aerodrome has advised its community to steer clear of its primary domain and instead use decentralized ENS alternatives, noting that investigations into any potential losses are still underway.

This incident is part of a larger pattern of vulnerabilities within DeFi. Aerodrome previously encountered two comparable attacks at the end of 2023,

. The latest disruption occurred shortly after the protocol revealed a merger with Velodrome, aiming to unify liquidity on both Base and Optimism under the “Aero” ecosystem. Despite recent challenges, the AERO token maintained its value at $0.67, marking a 2% increase over the past day.

Elsewhere, Bitcoin’s price falling below $90,000 has sparked widespread panic selling, with Glassnode reporting that liquidity pools are shrinking as investors exit the market.

from BlackRock’s (IBIT), which saw $523 million withdrawn in a single day—the largest daily outflow since its launch in January 2024. Over the course of five days, ETFs experienced $1.425 billion in redemptions, with accounting for $355 million of that total.

This downturn is influenced by broader economic factors, such as the Federal Reserve’s elevated interest rates and ongoing geopolitical tensions.

, allocating $218 million to gold and Bitcoin ETFs in the second quarter of 2025. This move highlights growing institutional trust in Bitcoin as a safeguard against inflation, even amid its recent price swings.

Bitcoin Updates: Institutional Investments in Bitcoin Face Challenges from DeFi’s Unused Liquidity and Security Issues image 0

Regulatory shifts were also a key focus this week. The U.S. Securities and Exchange Commission (SEC) indicated it would accelerate the approval process for crypto ETFs,

. Bitwise’s ETF made its debut on the NYSE, signaling a growing acceptance of alternative cryptocurrencies in mainstream finance.

At the same time, institutional investors are adjusting their approaches. The DeFi platform

has abandoned its plans for a retail-focused crypto application, choosing instead to prioritize institutional infrastructure, including a $1 billion investment in PayPal’s PYUSD stablecoin. This shift reflects a broader industry trend toward institutional-grade offerings as retail participation slows.

The DeFi sector’s liquidity shortages and ongoing security issues, combined with Bitcoin’s recent volatility, illustrate a market struggling with growing pains. While increased institutional involvement and clearer regulations provide optimism, the recent setbacks highlight the urgent need for stronger governance and continued innovation to ensure sustainable growth.

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"Liquidity Crisis: $12B in DeFi Liquidity Sits Idle as 95% of Capital Goes Unused"

"Aerodrome Finance Hit by 'Front-End' Attack, Users Urged to Avoid Main Domain"

"Harvard's Endowment Goes Big on Bitcoin and Gold in Second Quarter of 2025"

"BlackRock Bitcoin ETF Sees Record $523 Million Outflow as BTC Drops Below $90,000"

"Bitwise XRP ETF, BTC Narrative Collapse, and More - Week in Review"

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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