DeFi Tokens Surge as Trump Administration Shifts Crypto Landscape

Bitcoin dominated the crypto market in 2024, but shifting policies under the Trump administration could spark a rotation into alternative assets, according to Kaiko Research. Analysts Adam McCarthy and Dessislava Aubert highlight the growing strength of decentralized finance (DeFi), with the sector showing notable resilience.

Kaiko’s DeFi index (KSDEFI) has outperformed Ethereum (ETH) since its launch in October 2023, delivering an impressive 75% return. Despite being largely Ethereum-based, the index is showing a declining correlation with ETH, signaling the sector’s expansion beyond its original ecosystem.

The index tracks 11 DeFi tokens, with Uniswap (UNI), Aave (AAVE), and Ondo Finance (ONDO) carrying the most weight. These assets could continue to thrive throughout 2025, fueled by regulatory developments and increasing institutional adoption. If U.S. regulations evolve favorably, Uniswap and Aave could implement fee switches, potentially distributing protocol revenues to UNI and AAVE holders. Meanwhile, Ondo Finance is poised to benefit as Wall Street deepens its involvement in tokenization.

Since 2020, DeFi has faced hurdles like high transaction fees, security risks, and regulatory uncertainty. However, with regulatory pressure easing, the sector now has significant room for growth. Strong market tailwinds and improved adoption could drive further upside for DeFi tokens, positioning them as attractive alternatives amid shifting macro conditions.