Matt Hougan, Chief Investment Officer at Bitwise Asset Management, believes decentralized finance could play a central role in pulling the crypto market out of its current slump. His view follows a recent governance proposal from Aave Labs that he describes as a meaningful structural shift for the sector.
DeFi Showing Fundamental Strength
In a recent investor memo, Hougan argued that bear markets often weaken sentiment but strengthen infrastructure. According to him, the next crypto expansion phase is more likely to be driven by fundamentals — real users, real revenue, and sustainable economic models — rather than speculative narratives.
He notes that several DeFi protocols are already generating measurable cash flows, with transparent on-chain activity and growing usage. As investors become more valuation-focused, sectors that can demonstrate tangible economic value may stand out more clearly.
Aave’s Proposal Signals a Tokenomics Shift
Hougan highlighted a new governance proposal tied to Aave, informally referred to as “Aave Will Win.” Under the proposal, 100% of revenue from Aave-branded products would flow directly to the DAO treasury governed by token holders.
In exchange, Aave Labs would receive funding packages tied to development milestones for Aave V4 and transfer intellectual property rights to the community.
Hougan views this as a notable evolution: shifting tokens from pure governance instruments toward structures that more closely resemble economic participation in a growing financial network. Historically, many DeFi tokens granted voting rights but limited direct alignment with protocol revenue. Adjustments to tokenomics — including revenue sharing and treasury transparency — aim to close that gap.
Institutional Capital Re-Engaging
Hougan also pointed to increased institutional involvement. BlackRock has engaged with Uniswap infrastructure, while Apollo Global Management has allocated capital to Morpho, a competitor within the lending space.
Such moves, he suggests, reflect growing confidence in DeFi’s long-term business models — particularly as total value locked (TVL) across the sector remains near $96 billion despite broader market weakness.
The broader question now is whether DeFi’s structural improvements can translate into sustained capital inflows and renewed market leadership.
Could DeFi become the foundation of the next crypto cycle — or is it too early to call a rotation?
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This article is for informational purposes only and reflects personal commentary. It is not investment advice. Always conduct your own research before making financial decisions.
