Regulatory Clarity Could Propel DeFi Projects Forward
While Bitcoin (BTC) dominated the crypto landscape in 2024, shifting regulatory dynamics under the Trump administration may soon spark a market rotation into alternative assets, according to a new report from crypto analytics firm Kaiko Research.
Decentralized finance (DeFi) projects, in particular, appear well-positioned for potential outperformance, Kaiko analysts Adam McCarthy and Dessislava Aubert noted.
Since its launch in October 2023, Kaiko’s DeFi index (KSDEFI) has consistently outpaced Ether (ETH), delivering approximately 75% returns—a notable feat given that most of the index’s components are Ethereum-based.
“This trend could extend into the latter half of 2025, as several assets within the index benefit from strong tailwinds,” the report stated. “It also underscores the declining correlation between the DeFi index and ETH, as the sector continues expanding beyond the Ethereum ecosystem.”
The index tracks 11 DeFi tokens, with the largest allocations going to Uniswap (UNI), Aave (AAVE), and Ondo Finance (ONDO). At least four of these assets could experience significant growth throughout the year, according to Kaiko.
Regulatory developments in the U.S. may pave the way for Uniswap and Aave to introduce fee-switch mechanisms, potentially allowing protocol fees to be distributed to UNI and AAVE holders. Meanwhile, Ondo Finance stands to gain from the growing tokenization trend as traditional financial institutions deepen their engagement with blockchain technology.
“Regulatory roadblocks have been a key challenge for DeFi since 2020, but they’re only part of the equation,” Kaiko’s report explained. “High transaction costs and security concerns have also slowed adoption. However, with regulatory pressures easing, DeFi is now poised for substantial growth.”
