Wintermute Pushes into Vaults as DeFi Investing Evolves

Wintermute, an algorithmic trading firm processing more than $10bn in average daily trading volume, will initially launch two stablecoins vaults on lending protocol Morpho, with plans to expand to other protocols and blockchains.

The move comes as DeFi users look to expand beyond simple lending products and into more personalized investment strategies. A vault is a smart contract that automatically manages deposited assets, adjusting risk and moving funds between opportunities to generate yield.

Wintermute's vaults will directly handle liquidations instead of relying on third-party providers, a model the company said could support a wider range of collateral assets and potentially generate more yield for investors.

A growing trend

Wintermute is entering a market that is already drawing interest from asset managers and exchanges. Earlier this year, asset manager Bitwise also launched vault products on Morpho.

Token Terminal data shows that Morpho and Spark hold roughly $6.4bn in combined vault deposits. Morpho accounted for about $4.2bn, or nearly two-thirds of the total, while Spark held roughly $2.2bn. Over the past 30 days, deposits on Morpho rose 4.7%, while Spark jumped 40.3%.

Martin de Rijke, head of growth at onchain asset manager Maple Finance, said vaults are increasingly becoming the infrastructure behind future financial products rather than replacing them outright. He added that investors have increasingly shifted towards curated vault strategies because traditional lending pools often expose users to broader shared risks. 

"Traditional pools have a single, global risk profile where all depositors share exposure to every asset," de Rijke said. "Curated vaults use isolated lending markets, allowing depositors to choose specific risk profiles without exposure to unwanted assets, significantly improving capital efficiency."

He noted that the growth of vaults could eventually change how money moves through crypto markets and increase competition around risk management. 

"The biggest structural impact is going to be on how liquidity concentrates and flows, and several developments signal that the distinction between DeFi protocols and financial institutions is blurring," de Rijke said. "When capital flows through standardized vault infrastructure, protocols compete less on incentives and more on risk management quality and composability."

Shifting priorities and risks

Nirav Murthy, co-CEO of blockchain network Camp Network, said investors are also becoming more selective about how and where their money is deployed as the market matures.

He warned that vaults growing adoption could create new risks if too much money becomes concentrated on a few managers or strategies. "The biggest risk is that 'curated' becomes a marketing word. A vault is only as good as the judgement behind it," he said. "If too much capital crowds into a small number of managers or strategies, you can still get concentration risk, liquidity shocks, and correlated failures."

Murthy described a "trust paradox" in which DeFi reduces some trust requirements, but curated vaults reintroduce trust through reliance on a curator’s skill. "That is not a bad thing, but it needs to be acknowledged clearly. The transparent vaults will win over the vaults promising the highest yield."

'Not all strategies need vaults'

Brian Huang, co-founder of portfolio management platform Glider, explained to Sandmark that while vaults have become a popular way to manage onchain capital, they may not be the final form of investing in products. "Vaults are the modern way to aggregate capital. However, not all strategies need vaults and not all curators are created equal," he said.

Huang compared vaults to onchain mutual funds, where users deposit capital and a manager decides how to allocate it. "Investors deposit money and a curator deploys that capital into whatever they want," he said. "Like mutual funds, where you can only redeem at certain times, vaults may have lock up periods for those funds."

Still, Huang argued that the industry could eventually move toward more personalised products where users directly hold their own assets rather than relying on shared investment strategies. 

"In traditional finance, ETFs overtook mutual funds because of the lack of liquidity and fees," Huang added. "I see the same scenario eventually playing out here with vaults."