Coinbase Revives USDC War Chest to Dominate DeFi Liquidity in 2025
Coinbase just reloaded its financial artillery—and this time, it’s aiming straight at DeFi’s liquidity trenches.
The exchange’s resurrected USDC fund isn’t just a lifeline for the stablecoin—it’s a power move to control the plumbing of decentralized finance. Because what’s a crypto giant without playing puppet master with market liquidity?
Here’s the playbook: Dump millions into protocols, incentivize yield farmers, and watch USDC volumes spike while competitors scramble. All while pretending this isn’t a blatant land grab disguised as ‘ecosystem development.’
One hedge fund trader quipped: ‘They’re basically printing their own T-bills now—just with extra blockchain steps.’ Ouch.
Fund Restart Targets Leading DeFi Protocols
In its reveal on Tuesday, Coinbase revealed that the first phase of the restarted fund will focus on deploying USDC liquidity to four platforms: Ethereum-based lending protocols AAVE and Morpho, along with Solana-based trading platforms Kamino and Jupiter.
The deployments will be managed by Coinbase Asset Management, with the goal of ensuring users have access to reliable interest rates across both established and emerging DeFi ecosystems. Coinbase emphasized that it intends to work closely with “pre-start teams or those seeking to drive stablecoin growth from day one,” signaling its commitment to nurturing new projects as well as supporting established players.
Although the exchange did not disclose the size of the fund, the original Stablecoin Bootstrap Fund—started in 2019—allocated $1 million each to lending platforms Compound and dYdX. That initial effort played a key role in USDC’s early growth and adoption in the DeFi sector.
Strengthening USDC in a Tether-Dominated Market
Coinbase co-founded USDC in partnership with Circle Internet Group in 2018 and continues to be a central figure in the stablecoin’s ecosystem. Currently, USDC holds a market capitalization of $65.6 billion, making it the second-largest stablecoin after Tether’s $164.6 billion.
Tether continues to dominate the stablecoin sector, enjoying an over $100 billion lead in market cap and commanding the majority of trading volume. By directing more USDC liquidity into DeFi protocols, Coinbase hopes to attract more borrowers, traders, and yield farmers to the token—helping to close the gap with its rival.
USDC is supported across multiple blockchains, including Ethereum, Base, Solana, Polygon, Aptos, Avalanche, and Sui, allowing it to be deployed in a wide range of DeFi applications.
Broader DeFi Market Context
The restart comes at a time when the total value locked (TVL) in DeFi stands at $165.4 billion, according to DeFiLlama. The sector’s leading protocols include Aave with $41 billion in TVL and Ethereum’s liquid staking leader Lido at $40.8 billion.
Coinbase’s decision to start its new liquidity push with Aave and Morpho aligns with a broader trend in DeFi lending, where well-capitalized lending pools have become a cornerstone for stablecoin adoption. Meanwhile, supporting Kamino and Jupiter on Solana reflects Coinbase’s interest in cross-chain liquidity and emerging ecosystems beyond Ethereum.
A Look Back at the Original Fund
Coinbase first introduced the Stablecoin Bootstrap Fund in September 2019, just a year after USDC’s start. At that time, the fund focused exclusively on Ethereum-based protocols, helping Uniswap, Compound, and DYDX gain access to USDC liquidity.
That early seeding effort helped position USDC as one of the preferred stablecoins in DeFi, particularly for lending, borrowing, and liquidity provision.
Revenue Trends Show Stablecoin Growth
Coinbase’s MOVE to bolster USDC in DeFi also comes as its overall revenue faces pressure. The exchange reported $1.5 billion in revenue for Q2, falling short of analyst expectations of between $1.56 billion and $1.59 billion. This represents a 26% drop from the previous quarter.
Despite the revenue dip, stablecoin-related income—primarily generated through USDC—rose 12% to $332 million. This divergence highlights USDC’s growing role as a reliable revenue source for the company, making further investment in its adoption a strategic priority.
Expanding the Coinbase Ecosystem
The stablecoin push is part of Coinbase’s broader strategy to evolve beyond being just a trading platform. In July, Coinbase rebranded its Coinbase Wallet to the Base app, describing it as a step toward creating an “everything app” that integrates social features, apps, chat, payments, and trading.
John Granata, head of product for the Base app, said the goal is to “expand economic freedom, creativity, and innovation,” positioning the platform as a potential hub for a new kind of Web3-enabled social network.
Strategic Implications
Reviving the Stablecoin Bootstrap Fund positions Coinbase to achieve multiple objectives:
Increase USDC Liquidity – More liquidity in blue-chip and emerging DeFi protocols can make USDC more attractive to traders and borrowers.
Boost Stablecoin Revenue – With stablecoin-related earnings growing even as overall revenue declines, supporting USDC could provide a more stable income stream.
Expand Cross-Chain Influence – By targeting both Ethereum and Solana ecosystems, Coinbase can strengthen USDC’s multi-chain adoption.
Compete With Tether – While Tether maintains a commanding lead, expanding USDC’s footprint in DeFi could gradually erode that dominance.
Bottom Line: Coinbase’s decision to restart its Stablecoin Bootstrap Fund is a clear signal that the exchange sees DeFi liquidity as a battleground for stablecoin market share. By channeling USDC into both established and rising protocols, Coinbase is betting that liquidity access—and not just market cap—will determine which stablecoin dominates the next phase of decentralized finance.
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