After more than a decade of development, Ethereum has matured into a credible, neutral settlement layer for institutional-scale transactions. Finality, composability, and security now matter more than raw performance, with scalability handled by rollup chains that settle to Ethereum.

Ethereum is more than a payment network. Core protocols such as Uniswap, Aave, Lido, Maker, Balancer, Gnosis and others have evolved into resilient financial infrastructure, operating across market cycles without major failures and enabling thousands of onchain projects.

The infrastructure required by global institutions already exists. What remains missing is liquidity. Ethereum’s challenge is structural rather than technical.

Liquidity as the Bottleneck

DeFi lacks the liquidity required for institutional-scale execution. Without deep lending markets and efficient price discovery, significant capital remains sidelined. This creates a circular problem: institutions hesitate to move onchain because liquidity is thin, and liquidity remains thin because institutions stay off-chain.

Breaking this cycle requires participants with the capacity to anchor liquidity, provide stability across verticals, and act as reference points for institutional capital.

Ethereum Treasury Companies are well positioned to fulfil this role. By absorbing institutional demand for ETH and deploying it into DeFi, they can accelerate utility across the ecosystem, expand Ethereum’s financial capacity, and establish it as the default global financial system.

The ETH Liquidity Flywheel

Liquidity is the cornerstone of any financial system. Greater depth enables tighter spreads, lower slippage, and reduced volatility, conditions that attract further trading and reinforce liquidity.

Today, most volume remains concentrated on centralised exchanges, where execution quality is higher and slippage is lower. As a result, market makers have little incentive to provide liquidity onchain. On Ethereum Mainnet, a $10M ETH purchase still incurs around 1% slippage, forcing whales to rely on centralised counterparties.

The largest ETH pool on Uniswap holds less than $100M, well below institutional thresholds.

This is not a technical limitation but a structural one.

If Ethereum Treasury companies deploy capital onchain, these dynamics can change. Their positions would anchor liquidity, improve execution standards, and shift price discovery to decentralised markets. This activates the ETH liquidity flywheel: liquidity deepens utility, utility attracts demand, and demand strengthens both price formation and market depth.

The DeFi Flywheel Effect

Liquidity is not only about ETH, it underpins the entire DeFi ecosystem.

• Lending protocols depend on deep borrowing markets to set sustainable interest rates.
• DEXs require liquidity providers to reduce slippage and anchor price discovery.
• Derivatives need scalable collateral to support leverage and risk management.
• Insurance protocols require underwriting capital to provide meaningful coverage.

As liquidity deepens, capital efficiency improves, spreads compress, trading volume increases, and yields stabilise. This strengthens every layer of the system.

Large-scale deployments from Digital Asset Treasury (DAT) companies can extend these effects beyond ETH. Their activity would facilitate credit and leverage, enable new forms of organisation, and expand access to protective instruments such as insurance and derivatives.

Much as the opening of public markets accelerated growth for private enterprises in previous centuries, deploying treasury liquidity into open onchain markets can drive the next phase of growth.

Only one liquidity provider larger than $1 billion on Aave—the largest DeFi protocol—that being an exchange deploying its users’ funds.

Today, the infrastructure is mature, but the liquidity layer remains undercapitalised. If DAT companies operate fully onchain, they can activate this flywheel by anchoring liquidity in DeFi and providing the foundation for institutional capital to follow.

The Role of Ethereum Treasury companies

Ethereum Treasury companies already hold substantial ETH positions. By allocating part of this capital to conservative, transparent DeFi strategies, they can:

• Strengthen market structure and execution standards on Ethereum Mainnet.
• Establish benchmarks for institutional DeFi activity.
• Capture additional yield alongside long-term strategic upside.

This represents a tactical shift in treasury allocation that delivers measurable returns while reinforcing the broader system.

To align with the values of the ecosystem, Ethereum Treasury companies should operate directly onchain and support the infrastructure they depend on. They should use immutable infrastructure fully owned and controlled by the organisation, with custody kept internal and operations conducted securely, compliantly, and transparently.

ETH purchases should be executed onchain, credit accessed through public and private markets, and additional yield generated through conservative DeFi strategies. Risk, performance, and compliance metrics must be continuously monitored.

Endgame

Deploying ETH in DeFi generates returns beyond staking and builds strategic leverage:

• ETH Liquidity Flywheel: deepen liquidity, reduce risk premia, and reinforce ETH as a reserve asset.
• DeFi Flywheel: improve DeFi protocols efficiency, drive volume, and secure Ethereum’s long-term relevance.

In this way, Ethereum Treasury Companies evolve from passive holders to active shapers of Ethereum’s financial system. Over time, they can become the largest ETH holders and DeFi investors, setting the benchmark for institutional activity. Their rise will help solidify Ethereum Mainnet as the default global financial infrastructure.must be continuously monitored.