DeFi blue-chips, including Aave (AAVE) and SushiSwap (SUSHI), have been rallying hard in the past several days while Bitcoin is seeing range-bound consolidation at around $35,000 as of Jan. 17.

Both AAVE and SUSHI prices have risen by more than three-fold since December, within merely a month. Investors attribute the bull run of DeFi tokens to the market “re-rating” the major DeFi projects.

SUSHI/USDT 1-day price chart (Binance). Source: TradingView.com

Why is DeFi projects like SUSHI and Aave getting “re-rerated?”

The DeFi market has had an incredible run since 2020. The total value locked (TVL) across DeFi protocols has surpassed $22 billion, demonstrating the market’s fast growth.

DeFi market cap/TVL. Source: Digital Assets Data

However, despite the rapid growth, most DeFi protocols were valued at around $1 billion. In contrast, many “OG” altcoins have multi-billion dollar market caps, yet have lower user activity and no cash flow.

DeFi protocols are unique in that they are cash-flow generating. This means platforms like Aave, Synthetix, and Yearn.finance have small fees that can be used to fund the treasury or compensate users that stake their tokens to the protocols.

Based on the fast-growing userbase of most DeFi protocols and the increase in their cash flow, investors said that DeFi protocols are seeing a key “re-rating moment.”

Santiago R Santos, a partner at ParaFi, a DeFi-focused fund based in the U.S. said: