Decentralized finance tokens, often called DeFi, have shown surprising strength against Bitcoin over the last month. This has led some analysts to suggest the sector may be undergoing a quiet re-rating. Crypto index fund manager Bitwise pointed out the trend in a report released Thursday.
Bitcoin fell roughly 22% in June. But Bitwise’s index, which tracks tokens from major DeFi protocols, dropped only 4% during the same period. That gap is notable because DeFi tokens usually swing much harder than Bitcoin. They are often the first assets sold by risk-averse traders during market downturns. Seeing them hold up this well is unusual, and few people are talking about it, Bitwise noted.
Why DeFi might be gaining stability
The shift may be linked to changing usage patterns. Traditionally, DeFi tokens have a reputation for high volatility. But Bitwise argues this is changing as traditional institutions begin to use these protocols. This has helped stabilize the wider DeFi ecosystem. We think DeFi is quietly re-rating, the firm said. Token economics are improving, the gap between usage and token value is closing, and real institutions are building on names like Morpho and Jupiter. Aave alone has generated roughly $900 million in the past year.
Bitwise expects this outperformance to continue into the third quarter. It described the shift as something the market tends to notice late. But not everyone is convinced. Total value locked in DeFi has fallen nearly 40% so far this year through June, dropping to just over $70 billion from roughly $115 billion in January, according to data aggregator CryptoRank. That decline was linked to a major market correction in early October, which followed Bitcoin hitting a high of more than $126,000. Still, the current drawdown is smaller than during the 2022 bear market, suggesting a more resilient DeFi market.
Bitwise’s index and key holdings
Bitwise’s DeFi index fund weighs assets by market capitalization. Its current holdings are heavily weighted toward Hyperliquid’s native token, $HYPE, which makes up 61% of the fund. $HYPE has gained more than 160% so far this year. The index also holds Uniswap, Ondo, and Aave, among others. All of those tokens have fallen by double-digit percentages year to date, though.
Stablecoins and regulatory outlook
In its report, Bitwise also highlighted key upcoming events that could affect the broader crypto market. It expects a steady run of large firms to announce stablecoin projects ahead of the $GENIUS Act, a stablecoin-regulating bill that became US law last year and takes effect in January 2027. Stablecoin supply has held up despite the market downturn, and their growth could positively affect blockchains like Ethereum and Solana as regulators finalize rules.
Bitwise said the next three months will be make-or-break for the CLARITY Act, the crypto market structure bill currently under negotiation in the Senate. The firm said the bill has an unlikely chance of passing before the November elections. If it passes, we believe it likely marks this bear market’s bottom, Bitwise stated. If it fails, expect volatility initially, then a clearing of uncertainty as the industry keeps building under a pro-crypto SEC and CFTC.
