Decentralized financial tokens, often referred to as DeFi, have shown surprising strength against Bitcoin over the past month. This has led some analysts to suggest the sector could be in for a quiet revaluation. Crypto index fund manager Bitwise highlighted the trend in a report published on Thursday.
Bitcoin fell around 22% in June. But the Bitwise Index, which tracks tokens from major DeFi protocols, fell only 4% during the same period. This gap is notable because DeFi tokens typically swing much higher 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 talk about it, Bitwise noted.
Why DeFi Could Gain Stability
This change may be linked to changes in usage patterns. Traditionally, DeFi tokens have a reputation for being very volatile. But Bitwise says this is changing as traditional institutions start using these protocols. This has helped stabilize the broader DeFi ecosystem. We believe DeFi is quietly reevaluating, the company said. Token economics are improving, the gap between token usage and value is narrowing, and real institutions are building on names like Morpho and Jupiter. Aave alone has generated around $900 million over the past year.
Bitwise expects this outperformance to continue in the third quarter. He describes this change as something the market tends to notice late. But not everyone is convinced. The total value locked in DeFi fell nearly 40% from the start of this year through June, falling to just over $70 billion from around $115 billion in January, according to data aggregator CryptoRank. This decline was linked to a major market correction in early October, which followed Bitcoin hitting a high of over $126,000. Nonetheless, the current decline is lower than the 2022 bear market, suggesting a more resilient DeFi market.
Bitwise Index and Top Holdings
Bitwise’s DeFi index fund weights assets by market capitalization. Its current holdings are heavily weighted toward Hyperliquide’s native token, $HYPE, which represents 61% of the fund. $HYPE has gained over 160% so far this year. The index also contains Uniswap, Ondo and Aave, among others. However, all of these tokens have fallen by a double-digit percentage since the start of the year.
Stablecoins and regulatory outlook
In its report, Bitwise also highlighted key upcoming events that could affect the broader crypto market. He expects a steady number of large companies to announce stablecoin projects ahead of the $GENIUS Act, a bill regulating stablecoins that became U.S. law last year and will take effect in January 2027. The supply of stablecoins has held up despite the market slowdown, and their growth could have a positive impact on blockchains like Ethereum and Solana as regulators finalize the rules.
Bitwise said the next three months will be decisive for the CLARITY Act, the crypto market structure bill currently being negotiated in the Senate. The company said the bill was unlikely to pass before the November election. If this passes, we believe it will likely mark the bottom of this bear market, Bitwise said. If that fails, expect volatility first and then uncertainty fading as the industry continues to grow under a pro-crypto SEC and CFTC.
