Jack Paul 
Decentralized finance (DeFi) tokens have held up unusually well against Bitcoin over the past month, according to crypto index fund manager Bitwise. In a report issued Thursday, the firm suggested the market may be “quietly re-rating” the sector.
Bitcoin fell roughly 22% in June, while Bitwise’s index tracking tokens from major DeFi protocols dropped only 4% over the same period. “DeFi usually swings much harder than Bitcoin, so holding up this well is unusual, and almost no one is talking about it,” Bitwise noted.
A shift in DeFi’s volatility profile
DeFi tokens have a reputation for being highly volatile during crypto market swings. In the past, they were often the first assets sold by risk-averse traders. But Bitwise said this pattern is changing as traditional institutions have begun using these protocols. That adoption has helped stabilize the broader DeFi ecosystem.
“We think DeFi is quietly re-rating,” Bitwise wrote. “Token economics are improving, the gap between usage and token value is closing, and real institutions are building on names like Morpho and Jupiter, with Aave alone generating roughly $900 million in the past year.” The firm expects DeFi’s outperformance to persist through the third quarter.
Bitwise’s DeFi index fund weights assets by market capitalization. Its current holdings are heavily concentrated in Hyperliquid ($HYPE), the native token of the crypto perpetuals exchange, which has gained more than 160% year to date. The index also holds Uniswap (UNI), Ondo (ONDO), and Aave (AAVE), all of which have fallen by double-digit percentages since January.
Total value locked still declining
Despite the relative strength of some DeFi tokens, total value locked (TVL) in the sector has dropped sharply. CryptoRank reported on June 24 that TVL has fallen nearly 40% so far this year, declining from roughly $115 billion in January to just over $70 billion. The data aggregator attributed the drop to a major correction in early October, which followed the crypto market peak when Bitcoin hit a high above $126,000. However, the company noted that the current drawdown remains smaller than during the 2022 bear market, suggesting a more resilient DeFi market.
Regulatory catalysts and risks ahead
In its report, Bitwise also highlighted key upcoming events that could affect the broader crypto market. The firm expects “a steady run of large firms to announce stablecoin projects” ahead of the $GENIUS Act, a stablecoin-regulating bill that became law last year and takes effect in January 2027. Stablecoin supply has held steady despite the market downturn, and Bitwise believes their growth will positively impact blockchains like Ethereum and Solana as regulators finalize rules for the act.
Bitwise also said the next three months will be “make-or-break for the CLARITY Act,” the crypto market structure bill under review in the Senate. The firm sees an unlikely chance of it passing before the November elections. “If it passes, we believe it likely marks this bear market’s bottom,” Bitwise said. “If it fails, expect volatility initially, then a clearing of uncertainty as the industry keeps building under a pro-crypto SEC and CFTC.”