DeFi may be ‘quietly re-rating’ given outperformance against Bitcoin: Bitwise“DeFi usually swings much harder than Bitcoin, so holding up this well is unusual,” says Bitwise, as DeFi tokens have outperformed Bitcoin.
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Decentralized finance (DeFi) tokens have exhibited unusually strong performance against Bitcoin over the past month, according to a report by crypto index fund provider Bitwise. While Bitcoin dropped approximately 22% in June, Bitwise's index tracking major DeFi protocol tokens declined only about 4%, which is notable given that DeFi tokens typically experience higher volatility than Bitcoin. Bitwise highlighted that this relative stability in DeFi tokens has gone largely unnoticed by the market.
The report suggests this improved resilience is linked to increased institutional participation in DeFi protocols, which has helped stabilize the ecosystem. Bitwise also pointed to better token economics and a narrowing gap between usage levels and token values across the DeFi sector. Prominent projects like Morpho, Jupiter, and Aave, which generated roughly $900 million in the past year, are examples of institutional adoption contributing to this shift.
Bitwise's DeFi index is weighted heavily toward Hyperliquid (HYPE), a perpetuals exchange token that has surged more than 160% in 2024, though other holdings such as Uniswap (UNI), Ondo (ONDO), and Aave (AAVE) have experienced double-digit declines year to date. Despite some token gains, total value locked (TVL) in DeFi has declined by nearly 40% from around $115 billion in January to just over $70 billion through June, which data aggregator CryptoRank attributes to a market correction following Bitcoin’s peak. However, CryptoRank noted that the current DeFi drawdown is less severe than during 2022’s bear market, indicating increased sector resilience.
Looking ahead, Bitwise expects continued DeFi outperformance in the third quarter of 2024 and anticipates announcements of stablecoin projects from major firms ahead of the GENIUS Act’s 2027 implementation. The report also discussed the uncertain fate of the crypto market structure CLARITY Act in the Senate. Bitwise posited that if the CLARITY Act passes, it could mark the bottom of the bear market, while failure may lead to initial volatility but eventual industry progress under a pro-crypto regulatory environment.