Bitwise Spots DeFi Doing the Unthinkable: Quietly Outperforming Bitcoin 📊

Decentralized finance tokens have held up unusually well against Bitcoin over the past month, suggesting the market may be "quietly re-rating" the sector, according to a report from crypto index fund manager Bitwise released Thursday. Bitcoin ($BTC) fell about 22% in June, while Bitwise's index tracking tokens from major DeFi protocols declined only 4% over the same period. "DeFi usually swings much harder than Bitcoin, so holding up this well is unusual, and almost no one is talking about it," Bitwise wrote.

DeFi tokens have a reputation for sharp sell-offs during broader crypto downturns, as risk-averse traders tend to exit these positions first. Bitwise said that pattern is shifting as traditional institutions have begun using the protocols, which it described as stabilizing the wider DeFi ecosystem. "We think DeFi is quietly re-rating," the firm stated. "Token economics are improving, the gap between usage and token value is closing, and real institutions are building on names like Morpho and Jupiter, with Aave alone generating ~$900 million in the past year." Bitwise added that it expects "DeFi's outperformance to keep playing out in Q3, the kind of shift the market tends to notice late."

Bitwise's DeFi index fund weighs assets by market capitalization, with current holdings weighted 61% toward Hyperliquid ($HYPE), the native token of the crypto perpetuals exchange of the same name, which has gained more than 160% so far this year. The index also holds Uniswap ($UNI), Ondo ($ONDO) and Aave ($AAVE), among others, all of which have fallen by double-digit percentages year to date.

Despite the relative token-price resilience, total value locked in DeFi has fallen nearly 40% so far this year through June, declining to just over $70 billion from roughly $115 billion in January, according to data aggregator CryptoRank's June 24 report. The firm attributed the decline to the major correction in early October that followed Bitcoin's high of more than $126,000, while noting the drawdown is smaller than during the 2022 bear market.

Bitwise also outlined key upcoming events it expects will shape the crypto market, predicting "a steady run of large firms to announce stablecoin projects" ahead of the GENIUS Act, a US stablecoin-regulating bill made law last year that takes effect in January 2027. The firm said stablecoin supply has held amid the downturn and that growth in stablecoins will benefit blockchains such as Ethereum and Solana this quarter as regulators finalize GENIUS Act rules. Bitwise added that it expects the next three months to be "make-or-break for the CLARITY Act," the crypto market structure bill currently under negotiation in the US Congress.