In 2024, Bitcoin (BTC) had a firm grip on the crypto market spotlight. However, a shift seems to be on the horizon. According to a new report by crypto data company Kaiko Research, the new Trump administration could significantly shake up the rules of the game, potentially leading to a rotation towards other assets. And guess what? The decentralized finance sector (DeFi) appears to be surprisingly well-positioned for this.
Kaiko analysts Adam McCarthy and Dessislava Aubert are optimistic about the state of DeFi. Their report paints a picture of a sector that is far from struggling. The Kaiko DeFi index (KSDEFI), launched in October 2023, has since delivered an impressive performance. With a return of about 75%, this index even outperforms Ethereum (ETH) – despite most protocols in the index running on Ethereum. That’s no small feat. The analysts write:
“This outperformance could continue well into 2025. Several assets in the index have the wind in their sails.”
What stands out is that the correlation between the DeFi index and ETH is steadily decreasing. DeFi is clearly outgrowing its Ethereum roots and spreading its wings to other corners of the crypto world.
The KSDEFI index consists of 11 DeFi tokens, with altcoins like UNI (Uniswap), AAVE, and ONDO taking the lead. At least four of these tokens appear ready to shine for the rest of the year, according to Kaiko. What’s driving this growth? Mainly a mix of favorable market trends and potential regulatory changes.
Take Uniswap and Aave. These decentralized giants – an exchange and a lender – could benefit from new rules in the US. Think of adjustments in their fee structure, where the revenues finally go to UNI and AAVE holders. This could significantly boost the value proposition of these tokens.
Meanwhile, Ondo Finance, a player in tokenization, is poised to cash in on Wall Street’s growing interest in crypto with its new partnership with Mastercard. As traditional financial institutions embrace the world of tokenization, Ondo seems perfectly positioned to ride this wave.
However, it’s not all sunshine and rainbows. Since 2020, DeFi has faced significant hurdles, such as strict regulation in key markets. But that’s only part of the story. Users still complain about high costs, and security risks remain a hot issue. Yet, Kaiko sees light at the end of the tunnel:
“With regulation easing, there are huge growth opportunities for the sector.”
Bitcoin may currently wear the crown, but the rise of DeFi shows that the crypto market is becoming broader and more diverse. With a Trump administration that may take new paths, a shift of capital towards other assets seems increasingly likely. DeFi, with its flexibility and strong fundamentals, could well be the surprise of 2025. So, keep a close eye on that index – and especially on UNI, AAVE, and ONDO!
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