Let’s face it: DeFi isn’t just a playground for crypto-native developers anymore. With institutions sniffing around the edges, the game is about to change. And here’s the twist—Layer 2 (L2) solutions are perfectly positioned to lead this evolution.

But are they ready? The answer, sadly, is no. At least not yet. Between fragmented liquidity, unclear regulations, and infrastructure that still feels beta, L2s have work to do.

The good news is that the institutional door is open, and we can burst through it with the right moves.

A Sign of the Times: Bitcoin Searches Hit All-Time High

After President-elect Donald Trump’s recent victory, Bitcoin surged to all-time highs. Why? His campaign promised support for the crypto industry.

Google Trends backs it up: Search interest for Bitcoin spiked dramatically in late October, peaking in early November. Market watchers are calling this the biggest “ad” for crypto in years.

Google Trends show Bitcoin search interest hit peak popularity (100) following Trump's victory in early November 2024, marking the highest search surge in the period. Source: Google Trends

Ryan Chow, co-founder of Solv Protocol, even said:

“Bitcoin reaching an all-time high is one of the best advertisements for crypto there is.”

This is more than a retail moment. Institutions are paying attention and exploring how to incorporate digital assets into their portfolios.

So Why Isn’t DeFi Getting Its Piece of the Pie?

It’s simple: Institutions are used to order, structure, and efficiency. DeFi? It’s still a bit...chaotic.

Here are the big blockers:

1. Fragmented liquidity

Liquidity is scattered across too many pools. On Uniswap V2, for example, only 0.36% of pools surpassed $100M in trading volume over three years (August 2020-April 2023). Curve’s pools did slightly better at 34.6%, but institutions don’t want “slightly better.” They want deep liquidity, not a scavenger hunt.

2. Regulatory fog

Compliance is a non-negotiable for institutional players. Yet DeFi regulations, especially in major markets like the U.S., remain as clear as mud. No CFO is risking their career on a protocol that could be outlawed tomorrow.

3. Infrastructure woes

Existing wallets lack institutional-grade features like advanced multi-sig capabilities and ironclad custody solutions. This makes large-scale participation risky and impractical.

The Opportunity of L2s: A Gateway to Institutional Adoption

Trump’s election-fueled Bitcoin spike shows us something important: Crypto adoption hinges on narrative and timing. For DeFi, the narrative is institutional efficiency, and the time to act is now.

Here’s where L2s come in. Their speed, scalability, and lower transaction costs offer a potential bridge between DeFi’s promise and institutional needs.

But potential isn’t enough. To succeed, L2s must deliver solutions tailored to the institutional playbook.

How L2s Can Win the Institutional Game

1. Speak their language

Institutions don’t care about zkEVMs or rollups—they care about ROI, security, and efficiency. Highlight the outcomes, not the tech.

Example:

Don’t say, “We reduce gas fees with optimistic rollups.”

Do say, “Our platform cuts transaction costs by 70% while ensuring regulatory compliance.”

2. Aggregate liquidity

Fragmentation is institutional investors' kryptonite. L2s must consolidate liquidity across platforms, enabling smoother, larger transactions without the risk of market manipulation.

3. Build institutional-grade infrastructure

Think beyond today’s wallets. Institutions need:

• Secure custodial options

• Features like transaction thresholds and multi-user access

• Tools for seamless portfolio management

4. Embrace proactive compliance

Institutions can’t afford legal headaches. Help them sleep at night by:

• Using zero-knowledge proofs to balance compliance and privacy.

• Partnering with regulators to co-create clear frameworks.

What’s Next for L2s?

The L2s that will dominate the next institutional wave aren’t chasing headlines—they’re solving real problems. It’s time to move beyond flashy features and speculative tokenomics and focus on building infrastructure institutions can trust.

At Myosin, we’ve been here since the early days, working alongside Web3 pioneers to transform noise into meaningful, lasting growth. We understand what it takes to bridge the gap between DeFi innovation and institutional adoption.

Ready to position your L2 as the foundation of the future financial ecosystem? Let’s collaborate.

Book a call with us, and let’s talk about building a protocol that’s more than just a bet but the bridge institutions have been waiting for.