DeFi tokens outperform Bitcoin by 13% as sector quietly re-rates, Bitwise says

DeFi tokens outperformed Bitcoin by a wide margin over the past month, with the sector's relative strength suggesting a "quiet re-rating," according to Bitwise.

"DeFi usually swings much harder than Bitcoin, so holding up this well is unusual," a Bitwise research report published July 9 said.

The outperformance comes as Bitcoin traded at $63,733 as of 17:00 UTC, up 0.67% on the day but down roughly 30% year-to-date. Arbitrum's ARB gained 13% in the past 24 hours, while LIT rose 10%, according to CoinGecko data. Bitwise's Top 10 Crypto Index ETF recently dropped Polkadot and Avalanche from its holdings and added Hyperliquid's HYPE after its strong first-half performance, signaling shifting institutional preferences within the digital asset ecosystem.

If the re-rating thesis holds, capital could rotate further from Bitcoin into DeFi tokens, potentially driving a sustained sector-wide repricing. The next test for the trend will come as second-quarter earnings from major DeFi protocols are reported in the coming weeks.

What's Driving the Divergence

The divergence marks a departure from historical patterns. In prior downturns, DeFi tokens typically amplified Bitcoin's moves — falling harder during selloffs and rallying more aggressively during recoveries. The current cycle has broken that correlation, with DeFi tokens holding support levels that would have cracked in previous bear markets.

Total value locked across the top DeFi protocols stood at $78.4 billion as of July 9, according to DefiLlama, down from its 2024 peak but stabilizing after months of outflows. Ethereum-based DeFi protocols account for roughly 58% of that TVL, while Solana-based protocols represent about 12%.

Institutional Signals Point to Rotation

Bitwise's observation carries weight given the asset manager's role in the crypto ETF ecosystem. The firm's shift in its Top 10 Crypto Index ETF — removing DOT and AVAX while adding HYPE — reflects a broader recalibration of how institutional allocators view the DeFi sector relative to layer-1 blockchain tokens.

"DeFi protocols are generating real revenue from trading fees and lending spreads, which gives them a valuation anchor that pure layer-1 tokens often lack," the Bitwise report said. That revenue generation, combined with token buyback mechanisms and yield-sharing models adopted by protocols such as Uniswap and Aave, may be providing a floor that didn't exist in previous cycles.

This article is for informational purposes only and does not constitute investment advice.