Bitcoin (BTC) has indeed been a shining star in the cryptocurrency market in 2024. However, the changing financial landscape under the Trump administration hints at a possible shift of focus to other digital assets. This is according to a recent report by Kaiko Research, a leading data analytics firm in the crypto industry.
Interestingly, the decentralized finance (DeFi) sector is showing promising signs. The sector hasn’t just survived but thrived amidst the Bitcoin frenzy. Adam McCarthy and Dessislava Aubert, analysts at Kaiko Research, shared these insights in a newly published report.
The Kaiko DeFi index (KSDEFI), as the report highlights, has outperformed Ether (ETH) since its conception in October 2023. The index has recorded approximately 75% returns within this period. This is an impressive achievement, given that most of the protocols included in the index are Ethereum-based.
According to the report, “This outperformance may persist into the latter half of 2025, as several assets within the index benefit from strong tailwinds. 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 DeFi index comprises 11 DeFi tokens, with UNI, AAVE, and ONDO being the most heavily weighted. The report indicates that at least four of these tokens will continue to experience strong growth throughout the year.
Particular attention is drawn to the potential impact of U.S. regulatory developments on Uniswap, a decentralized exchange, and Aave, a decentralized lender. These changes could provide an avenue for these platforms to implement fee switches for their respective tokens. This means that protocol fees could potentially be distributed to UNI and AAVE holders.
Ondo Finance, a tokenization protocol, is also expected to capitalize on the growing trend of tokenization. As Wall Street continues to embrace cryptocurrency, Ondo Finance stands to reap significant benefits.
The report acknowledges that regulatory constraints have been a major challenge for the DeFi sector since 2020. These, coupled with structural issues such as high transaction fees and security concerns, have posed significant hurdles. However, with easing regulatory scrutiny, the report optimistically concludes, “the sector now has abundant opportunities for growth.”
In conclusion, the future seems bright for the DeFi sector, as it continues to outpace other digital assets and expand beyond the Ethereum ecosystem. The sector’s growth is not just a testament to its resilience but also a promising indication of its potential in the ever-evolving world of cryptocurrency.
