Why DeFi Projects Could Be Ready to Outperform: Kaiko Research

Bitcoin (BTC) took the highlight from the remainder of the crypto market in 2024, however the Trump administration is shortly altering the principles of the sport and a rotation into different property might find yourself occurring, in accordance to crypto knowledge agency Kaiko Research

In truth, the decentralized finance (DeFi) sector isn’t trying too dangerous, Kaiko analysis analysts Adam McCarthy and Dessislava Aubert wrote in a brand new report.

The firm’s DeFi index (KSDEFI) has outpaced ether (ETH) for the reason that instrument’s inception in October 2023, bringing in roughly 75% returns in that span of time. That’s exceptional contemplating that many of the protocols included within the index are constructed on Ethereum.

“This outperformance may persist into the latter half of 2025, as several assets within the index benefit from strong tailwinds,” the report mentioned. “This trend highlights the decreasing correlation between the DeFi index and ETH over time, as the decentralized finance sector continues to expand beyond the Ethereum ecosystem.”

The index consists of 11 DeFi tokens, essentially the most closely weighted being UNI, AAVE and ONDO. At least 4 of those tokens have highly effective tailwinds for the remainder of the yr, the report mentioned.

For instance, regulatory developments within the U.S. might open up prospects for decentralized trade Uniswap and decentralized lender Aave to implement price switches for every of their respective tokens, that means that protocol charges might find yourself getting distributed to UNI and AAVE holders.

Tokenization protocol Ondo Finance, for its half, will doubtless profit from an acceleration of the tokenization pattern as Wall Street retains wading deeper into crypto, the report mentioned.

“Regulatory constraints in key markets have been a significant hurdle [since 2020], but they are only part of the challenge. DeFi has also faced structural issues, including high user friction due to fees and security concerns. However, with regulatory scrutiny easing, the sector now has abundant opportunities for growth,” the report mentioned.