Key Highlights:
- DeFi protocols may outperform in the second half of 2025, according to Kaiko Research.
- The Trump administration is expected to bring crucial regulatory clarity to these projects.
- Kaiko emphasized the potential of individual tokens like UNI, ONDO, and AAVE.
Bitcoin (BTC) dominated the crypto market in 2024; however, with adjustments from the Trump administration, a shift towards other assets seems likely. According to Kaiko Research analysts, the decentralized finance (DeFi) sector is positioned for positive outcomes.
In a recent report, they noted that the company’s DeFi index (KSDEFI) has notably outperformed ether (ETH) since its inception in October 2023, achieving approximately 75% returns over that period, a remarkable feat as most indexed protocols are built on Ethereum.
This outperformance may persist into the latter half of 2025, as several assets within the index benefit from strong tailwinds.
Translation: 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.
Composition of the Index:
The index features 11 DeFi tokens, predominantly weighted towards UNI, AAVE, and ONDO. Four of these tokens are expected to have significant support throughout the year due to regulatory developments, particularly in the U.S., which may allow platforms like Uniswap and Aave to implement fee switches that benefit their token holders.
Additionally, the tokenization protocol Ondo Finance is anticipated to gain traction as Wall Street increasingly embraces crypto. Kaiko’s report also acknowledges the crucial role regulatory clarity plays in overcoming previous hurdles within the DeFi sector, which has faced user friction both from fees and security concerns.
