Stronger than Bitcoin... DeFi Tokens, 'Quiet Reassessment' Begins Amidst Bear Market?

▲ Hyperliquid (HYPE)/AI generated image ©

An analysis has emerged suggesting that a 'quiet reassessment' is underway in the market, as Decentralized Finance (DeFi) tokens have recorded more robust returns than Bitcoin over the past month. With institutional capital inflow and improved token economics coinciding, there is a possibility that the relative strength will continue into the third quarter.

According to Cointelegraph, a cryptocurrency specialized media outlet, on July 10 (local time), Bitwise, a cryptocurrency index fund manager, stated in a recent report that DeFi tokens are showing unusually strong performance compared to Bitcoin. While Bitcoin fell by approximately 22% last June, the Bitwise DeFi Index, which tracks major DeFi protocols, only dropped by 4%. Bitwise stated, "DeFi is generally more volatile than Bitcoin, but this time it has shown much more robust performance than expected, and the market is not yet paying enough attention to it."

Bitwise cited the increased participation of institutional investors as the background for this change. It explained that as institutions actively utilize DeFi protocols, the ecosystem is stabilizing, and the token economic structure is also improving. In particular, the gap between token utility and value is narrowing, and actual institutions are participating in major projects such as Morpho and Jupiter. Furthermore, AAVE generated approximately $900 million in revenue over the past year, demonstrating the growth potential of the DeFi market. Bitwise predicted that this trend would continue into the third quarter.

Bitwise's DeFi Index is composed based on market capitalization, with Hyperliquid (HYPE) currently accounting for 61% of the total weighting. HYPE has surged over 160% this year, driving the index's performance. In contrast, other major DeFi tokens such as Uniswap (UNI), Ondo (ONDO), and AAVE have recorded double-digit declines this year.

However, an analysis also suggested that the entire DeFi market has not fully recovered. According to CryptoRank, the total value locked (TVL) in DeFi decreased by approximately 40%, from about $115 billion in January this year to slightly over $70 billion in June. However, Bitwise assessed that this correction was relatively limited compared to the 2022 bear market, indicating that the DeFi market's resilience has strengthened.

Bitwise identified the Stablecoin Regulation Act GENIUS, the U.S. cryptocurrency market structure bill, and the CLARITY Act as future market variables. It anticipated a series of stablecoin business announcements from large companies ahead of the implementation of the Stablecoin Regulation Act GENIUS, and expected that the finalization of related regulations would positively impact major blockchain ecosystems such as Ethereum and Solana. Furthermore, if the U.S. cryptocurrency market structure bill and the CLARITY Act are passed, it could be an opportunity to confirm the bottom of the current bear market; however, even if the bills fail, industry growth is expected to continue as regulatory uncertainties are resolved after short-term volatility.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*