Which DeFi Tokens Have Outperformed During Bitcoin's Two-Month Consolidation?

Written by: The DeFi Edge

Compiled by: Luffy, Foresight News

Bitcoin has been in a sideways consolidation for two months, but many DeFi tokens have completely diverged from the market trend.

After a 21% surge in August, Bitcoin entered a range-bound phase. Since August 22, Bitcoin's daily closing price has fluctuated between $75,600 and $86,600. During this period, Bitcoin's overall increase was 5.6%, while Ethereum actually fell by 2.7%.

Among the 19 leading DeFi tokens that provide dividends to holders, 14 outperformed Bitcoin. Notably, Raydium surged by 178%. The median increase for this group of tokens reached 12.9%, more than double Bitcoin's increase.

Why Focus on "Actual Returns Distributed to Holders"?

Looking solely at total protocol revenue can be misleading. Some protocols may earn a lot of money but distribute nothing to token holders, with profits ultimately going to the team.

Therefore, this article focuses on "actual returns distributed to holders": including token buybacks, fee burns, and direct distributions to holders, based on data from DeFiLlama.

To qualify, tokens must meet the following criteria:

• Only core DeFi projects are counted: DEX, perpetual contracts, lending, collateralized debt positions, liquid staking, yield tools, yield aggregators. Public chains, oracles, and Launchpads are excluded (including Pons, etc.).
• As of August 22, the market capitalization must exceed $100 million.
• There must be a record of distributing returns to holders in the past year.

All tokens meeting these criteria are included in the statistics. For example, Raydium uses profits from its Launchpad business to buy back tokens, and Hyperliquid directly burns fees, both of which count as actual returns to holders.

The statistical period is from August 22 to October 20, compared with the previous 59 days of data, with price data sourced from CoinGecko, ultimately selecting 19 tokens.

In the table, "Market Cap / Annualized Returns to Holders" refers to the total market cap divided by the total returns distributed to holders over a year, based on current return levels. A lower value indicates that investors pay less for each dollar of dividends.

Which Tokens Performed Best?

Tokens are divided into two groups for comparison: one group with increasing dividends, with a median increase of 18.3%; the other group only saw a 6.9% increase.

The top three tokens all have clear growth logic for their returns:

• Raydium: On September 5, the tokenized stock issuance platform StonkFun integrated with Raydium's LaunchLab. The buyback scale for RAY tokens skyrocketed from $360,000 in July to $3.94 million in September, an 11-fold increase.
• Uniswap: The fee-sharing mechanism has long been in place, and with Robinhood Chain bringing in massive trading volumes, nearly half of Uniswap's protocol revenue in September came from this public chain.
• Aerodrome (AERO): After the merger of Aerodrome and Velodrome, token holders can earn from trading fees and various project payments for purchasing liquidity. In September, this revenue reached $14.9 million, surpassing the $10.5 million paid to liquidity providers.

Conversely, edgeX saw a 15% decline in actual returns to holders, with its token price plummeting by 22%, making it the worst performer in the sample.

Is a low valuation equal to a good opportunity? The data this time provides a different answer, with surprising results. AERO had the lowest valuation multiple at only 8.7 times, while its token price surged by 77%; edgeX had a valuation of 15 times, the second lowest in the sample, yet its performance was the worst. Simply looking at valuation cannot predict future price movements of tokens.

Some tokens do not conform to the above patterns.

• Hyperliquid (HYPE): Returns to holders surged by 79%, but the token price only increased by 6%. Its fully diluted valuation (FDV) is as high as 85 times; approximately $800 million worth of HYPE is unlocked each month, but the monthly buyback amount is only $75 million, creating significant selling pressure in the market.
• Sky (SKY): On August 13, through governance voting, 55% of each period's returns were allocated to buy back tokens, while 45% were distributed to stakers. Holder returns nearly quadrupled, but the token price only increased by 11%.
• Aave (AAVE): Following the rsETH security incident, Aave suspended token buybacks and did not distribute any dividends to users during the statistical period, yet the token price still rose by 24%.

I believe that market pricing considers both current dividend levels and future return expectations. Dividend expectations are not the only factor affecting token prices.

How to Choose DeFi Tokens if Bitcoin Enters Consolidation Again?

When researching projects, three points must be considered, and none can be overlooked:

• The project must genuinely distribute returns to holders, and this must be on an upward trend.
• There must be actual positive drivers: for example, launching new businesses, implementing fee-sharing to bring in more trading volume, or events like protocol mergers.
• Always check token unlock schedules and fully diluted valuations (FDV). Hyperliquid serves as a cautionary tale; once a large number of tokens are unlocked and sold into the market, it can suppress price increases.

Additional Notes

• This analysis includes only 19 token samples, with a statistical period of 59 days, so the conclusions are not absolutely conclusive. If data from another month were included, the rankings of mid-tier tokens could be completely rewritten.
• The price and dividend yield statistics cover the same two-month period; this method is merely an observational metric and does not imply that one could accurately select rising tokens based solely on these rules as of August 22.
• The valuation multiples in this article are calculated using circulating market cap. Many projects have large amounts of locked tokens, which can make valuations appear cheaper than they actually are. Hyperliquid's valuation based on circulating market cap is 19.6 times (with a circulating market cap of $18.1 billion), while its FDV is as high as 85 times (FDV of $77.8 billion).
• Holder return data comes from DeFiLlama; while the data cannot be 100% accurate, it is among the highest quality data sources in the industry.
• Some projects distribute dividends in bulk. For example, Lido's buybacks must be executed after DAO voting, so a month with low returns does not mean the project has stopped distributing dividends.
• Meteora did not participate in the two-group performance comparison, as its dividend function has just been launched, and there is no historical data for comparison.
• The returns to holders from THORChain come from the fee burn of RUNE tokens, and on September 12, the burn rate was reduced from 5% to 1%, which is unrelated to its price fluctuations and dividend growth logic.
• Additional data on exceptional samples: Hyperliquid distributed a total of $146.9 million in returns to holders during these 59 days, accounting for 59% of the total returns across all samples; the team unlocks approximately 9.9 million HYPE each month.
• Sky's valuation multiple dropped from 98 times to 28.5 times.