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Bitwise is making a clear call on where to look in a weak market: DeFi.
In a new CIO memo published Feb. 17, Bitwise Chief Investment Officer Matt Hougan argues that decentralized finance could help lead crypto out of the current downturn, not because of hype, but because some of the sector’s biggest protocols already have real usage and revenue — and are now starting to fix the tokenomics problem that has held their tokens back.
The core argument: DeFi has real businesses, but weak token value capture
Hougan’s starting point is familiar to anyone who has watched DeFi for the past few years: the protocols often look stronger than the tokens.
He points to major DeFi names like Uniswap and Aave as examples of products with real volume and revenue, while noting their tokens have underperformed despite platform usage growth. In his view, the problem is not user demand — it’s that many DeFi tokens were designed mainly as governance tokens, with little or no direct claim on protocol economics.
Hougan ties that design choice to U.S. regulatory pressure in earlier years, when teams tried to avoid securities classification risk by stripping out obvious value-accrual mechanisms. The result, he argues, was a generation of tokens that could vote, but not clearly capture the upside of protocol growth.
Why Aave is the centerpiece of the memo
The memo centers on a new Aave Labs governance proposal titled “Aave Will Win.” Hougan presents it as a potentially important shift in how DeFi tokenholders are treated economically.
According to Hougan’s summary, the proposal would have Aave Labs direct 100% of revenue from Aave-branded products (including the website, a future mobile app, the Aave Card, and institutional services) to the DAO treasury, which is controlled by tokenholders. In exchange, Aave Labs would receive a funding package that includes stablecoins, AAVE tokens, and milestone-based grants, alongside support for Aave V4 development and intellectual property transfer.
Hougan also notes a proposed foundation structure to hold the Aave brand and trademarks on behalf of the community, rather than leaving them under Aave Labs’ control.
The bigger point: from governance token to something closer to equity
Bitwise’s read is that Aave’s proposal, if adopted in a workable form, could move the AAVE token closer to a true economic asset — not legal equity, but something that behaves more like a claim on a growing financial network’s cash flows.
Hougan is careful to note there are unresolved questions. He cites community criticism that the funding request may be too large or “extractive,” and flags open questions around how “revenue” would be defined and whether Aave Labs would retain discretion over what counts.
Still, his broader thesis is that this is the direction DeFi needs to go: cleaner value accrual, clearer incentives, and governance tokens that are tied more directly to protocol economics. If Aave can make that transition, he suggests, other DeFi protocols could follow.
Institutional signals are part of the story too
Hougan also highlights what he sees as confirmation from traditional finance. In the memo, he points to BlackRock’s investment in Uniswap tokens and Apollo’s investment in Morpho as signs that institutional capital is paying attention to DeFi infrastructure, even in a weak market.
The tone of the memo is clearly directional — this is a CIO opinion piece, not a neutral regulator filing — but the key takeaway is useful even if you discount the optimism: Bitwise is saying the next DeFi cycle may be driven less by “new narrative” and more by better token design around already-proven products.
Why it matters for crypto
- This is a fundamentals-first DeFi thesis. Bitwise is arguing that usage and revenue already exist, and the missing piece is better token value capture.
- Aave’s governance proposal could become a template. If DeFi projects can route more product revenue to DAO-controlled treasuries, tokenholder incentives may start to look much cleaner.
- Institutional participation is shifting toward protocol-level exposure. The memo’s references to Uniswap and Morpho suggest institutions may increasingly back DeFi infrastructure, not just BTC/ETH.
- Regulatory history still shapes token design. Bitwise’s point about “governance-only” tokens is a reminder that earlier SEC pressure still affects how DeFi assets are structured today.
What to watch next
- Aave governance response and revisions. Hougan highlights legitimate pushback, so the final structure may change materially before any implementation.
- How “revenue” gets defined in DeFi tokenomics proposals. That detail will determine whether value accrual is clean or still leaves discretion with development teams.
- Whether other major protocols copy the model. If Uniswap, Morpho, or others push similar DAO-first revenue structures, Bitwise’s thesis gets stronger.
- Institutional deal flow into DeFi equity/tokens. Hougan’s memo leans on early examples; the next signal is whether those become a trend.
Source: Bitwise Blog – DeFi Could Lead Us Out of Crypto Winter