RootstockLabs: Bitcoin Lending Could Spark Next Institutional Demand Wave

Only 1.5% of Bitcoin's supply currently participates in lending and Bitcoin-native finance, according to a new report from Bitcoin infrastructure developer RootstockLabs, which argues that putting institutional holdings to work through lending, collateral and balance-sheet financing could drive the asset's next wave of institutional demand.

The report, authored by Tony DiCarlo, director of institutional propositions at RootstockLabs, estimates identifiable institutional investors hold roughly 3.9 million BTC. Activating more of those holdings, the analysis contends, could create additional demand without changing Bitcoin's fixed supply — a structural point RootstockLabs leans on throughout.

Where does the new utility come from?

The report identifies two emerging sources of financial utility. The first is generating returns on existing holdings through lending and structured credit. The second is using Bitcoin alongside fiat-denominated liabilities to improve corporate balance-sheet efficiency. Both, RootstockLabs argues, could push institutions to acquire and retain more BTC.

The analysis sketches a hypothetical scenario: if institutional Bitcoin holdings doubled to 7.8 million BTC and 5% of that stack earned a 5% annual yield, institutions would collectively generate 19,500 BTC per year. The report is explicit that this figure represents potential returns on existing holdings, not a forecast of new demand.

RootstockLabs draws a parallel with gold. Successful monetary assets, the argument goes, develop demand sources beyond their original store-of-value role — gold found jewelry and electronics, while Bitcoin's next utility layer is likely to emerge through financial markets.

Does financialization introduce new risks?

DiCarlo doesn't dodge the question. "Yes, financialisation carries real risks," he told Cointelegraph. "Fractional reserves, rehypothecation and excess leverage can grow around any scarce asset. Bitcoin's traits reduce some of that risk as collateral is verifiable on-chain, liquidation rules are programmable and the supply of collateral cannot be diluted."

He flagged borrower defaults, custody failures and legal enforceability as persistent concerns, and acknowledged that Bitcoin's volatility compounds leverage risk. Still, he argued the benefits could far outweigh the risks, citing MARA's $750 million in Bitcoin-backed loans to help finance a planned power plant acquisition in Ohio. The arrangement lets MARA keep its Bitcoin holdings while using them as collateral for real-world infrastructure.

DiCarlo also conceded that institutional adoption could concentrate Bitcoin among a small number of custodians. Spot Bitcoin exchange-traded funds have been a major adoption driver, but "shareholders own shares, not coins," he said — a structure through which a few large custodians could end up holding most of the Bitcoin.

Why does decentralization still matter?

Despite that concentration risk, DiCarlo maintained that Bitcoin's decentralized architecture remains a fundamental advantage, letting holders retain control of their assets and enabling financial services with fewer intermediaries — and, in theory, lower counterparty risk and fees.

"Bitcoin's defining trait is that nobody owns it and you don't need an intermediary to use it," he said. "Holders keep control of their keys and because there are fewer middlemen, financial services built on Bitcoin can carry less counterparty risk and fewer fees. Those advantages draw users in and they reward the builders who design around them."

The report lands as institutional Bitcoin exposure keeps deepening through ETF channels, and its core wager is operational rather than speculative: with only 1.5% of supply currently active in Bitcoin-native finance, the lending and collateral market remains barely built out — and how quickly institutions move their holdings into productive use will shape the next phase of Bitcoin's market structure.