DeFi Could Outshine Bitcoin as Market Conditions Shift, Says Kaiko

Bitcoin (BTC) dominated the crypto landscape in 2024, but the tides may be turning as investors seek opportunities beyond the largest cryptocurrency. According to a recent report from Kaiko Research, DeFi projects could be on the verge of a breakout as regulatory clarity improves.

Analysts Adam McCarthy and Dessislava Aubert highlighted that Kaiko’s DeFi index (KSDEFI) has delivered roughly 75% returns since its launch in October 2023, outpacing Ethereum (ETH) despite most of its components being built on the Ethereum network.

“This upward momentum could persist through late 2025, as several key DeFi assets benefit from industry tailwinds,” the report stated. “Over time, the correlation between DeFi and ETH has weakened, underscoring the sector’s increasing independence.”

The KSDEFI index tracks 11 DeFi tokens, including major players such as Uniswap (UNI), Aave (AAVE), and Ondo Finance (ONDO). At least four of these assets are poised for growth in the coming months, the report noted.

For example, potential regulatory changes in the U.S. could allow Uniswap and Aave to introduce fee-switch mechanisms, enabling revenue sharing with token holders. Meanwhile, Ondo Finance stands to benefit as institutional adoption of tokenization accelerates.

“Since 2020, regulatory uncertainty has been one of DeFi’s biggest obstacles, alongside high costs and security risks,” the report explained. “However, with regulatory scrutiny easing, DeFi is now in a strong position to scale and attract a new wave of investment.”