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Why DeFi Projects Could Be Ready to Outperform: Kaiko Research
Regulatory clarity may provide a boost for DeFi projects.
Updated Feb 28, 2025, 7:32 p.m. Published Feb 28, 2025, 6:31 p.m.
What to know:
- DeFi protocols may outperform in the second half of 2025, according to Kaiko Research.
- The Trump administration may bring long-needed regulatory clarity to these projects.
- Kaiko emphasized the potential of individual tokens like UNI, ONDO and AAVE.
Bitcoin took the spotlight from the rest of the crypto market in 2024, but the Trump administration is quickly changing the rules of the game and a rotation into other assets could end up happening, according to crypto data firm Kaiko Research
In fact, the decentralized finance (DeFi) sector isn’t looking too bad, Kaiko research analysts Adam McCarthy and Dessislava Aubert wrote in a new report.
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The company’s DeFi index (KSDEFI) has outpaced ether since the instrument’s inception in October 2023, bringing in roughly 75% returns in that span of time. That’s remarkable considering that most of the protocols included in the index are built on Ethereum.
“This outperformance may persist into the latter half of 2025, as several assets within the index benefit from strong tailwinds,” the report said. “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 index is composed of 11 DeFi tokens, the most heavily weighted being UNI, AAVE and ONDO. At least four of these tokens have powerful tailwinds for the rest of the year, the report said.
For example, regulatory developments in the U.S. may open up possibilities for decentralized exchange Uniswap and decentralized lender Aave to implement fee switches for each of their respective tokens, meaning that protocol fees may end up getting distributed to UNI and AAVE holders.
Tokenization protocol Ondo Finance, for its part, will likely benefit from an acceleration of the tokenization trend as Wall Street keeps wading deeper into crypto, the report said.
“Regulatory constraints in key markets have been a significant hurdle [since 2020], but they are only part of the challenge. DeFi has also faced structural issues, including high user friction due to fees and security concerns. However, with regulatory scrutiny easing, the sector now has abundant opportunities for growth,” the report said.
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- GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month.
- Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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