Summary Despite a 37% drop in DEFT shares, I see this as a buying opportunity given strong Q2 results and raised FY25 guidance. Crypto cycle theory and technicals point to a potential altcoin rally, which would directly benefit DeFi Technologies' revenue and margins. Valuation remains attractive, with a forward P/E of just 5.15, offering room for multiple expansion if assumptions are met. Risks are high, but if the crypto market performs strongly into year-end, DEFT's risk-reward profile has improved since my last update. Introduction Since my first coverage of Canadian based cryptocurrency company DeFi Technologies ( DEFT ), the stock has dropped more than 37% despite Bitcoin ( BTC-USD ) having gained more than 4% since and the firm having reported solid Q2 2025 results, including raising their FY25 guidance. Year-to-date, DEFT is down 23%, while Bitcoin gained 17% and the S&P 500 index increased by 10%. Data by YCharts This strong underperformance against Bitcoin and the broader market can be interpreted as either the start of a negative trend leading to much more downside or as an opportunity to invest as the stock might inevitably play catch up. I believe the latter is more likely to be the case as lower prices entail lower valuations which consequentially increases the potential for higher shareholder returns. Data suggests that crypto markets, especially altcoins will head strong into year-end 2025, which should benefit most of DeFi's business lines. Under these assumptions, shares seem attractively priced. In addition, technical factors support a relief rally, even if no further ATHs are being achieved, leading me to reiterate my Buy rating for now. Outlook Bitcoin cycle theory suggests a 4-year repetitive rhythm of changes in digital asset prices, complimentary to Bitcoin's halving approximately every four years. The post-halving year typically marks the strongest performing year for cryptocurrencies. This was the case in 2013, 2017, 2021, and might also occur in 2025, after the halving was completed in April 2024. With Bitcoin reaching prices north of $120k, the longer term uptrend is still in play until price closes below $99k, despite having dropped to $108k. As long as we stay above $100k, the trend remains intact. TradingView Further, no Bitcoin top signals have alerted so far. Some indicate that we are getting closer to the end, but following cycle theory, that should be expected, as 2025 would be the final year of price appreciation until the inevitable bear market the following year. What we're currently seeing is the rally turning towards Ethereum ( ETH-USD ). Ethereum dominance has risen to 14.6% in 2025 , while Bitcoin dominance has declined to around 58–60%, signaling that capital is moving into altcoins. Institutional interest , and growing activity on Ethereum-based platforms are contributing to this trend. As Ethereum leads, broader altcoin gains are becoming more likely, setting the stage for a robust altcoin season. DeFi's AUM will rise both from higher inflows from new investors and higher digital asset prices. This is a flywheel that especially gains traction during a peak euphoria bull market. A strong altcoin cycle benefits DeFi even more, because most of their ETPs are based on altcoins. Further, they do not earn management fees on their BTC and ETH ETPs but do so on all other ones, leading to both higher revenue and higher margins, as more revenue flows through DeFi's already existing platforms which entail fixed costs. DEFT IR In addition, DeFi Alpha, the firm's trading desk, can make great returns at lower risks, as they can profit from swing longs rather than having to try and time the markets or go for more risky mean reversion or other trading and arbitrage strategies. Valuation Q2 2025 financials were solid. Here's a brief overview: Adjusted Revenue reached $32.1M Adjusted EBITDA was $21.6M, representing a margin of 67%. Adjusted Net Income totalled $17.4M, representing a margin of 54% Valour's asset-management business reported approximately $772.8M in AUM as of June 30, 2025. By July 31, 2025, AUM had risen to $947M DeFi raised their 2025 operating revenue guidance by 8.5% from $201M to $218.6M If the flywheel takes off, digital asset prices continue to appreciate, and DeFi simply delivers what they guide for, they could easily report $130M of adjusted net income, representing profit margins of 59%. This would put them at a 2025 forward P/E ratio of just 5.15 which seems very low. It has to be kept in mind that DeFi Technologies is a very speculative company with a larger degree of uncertainty when it comes to future earnings and therefore deserves to be discounted. At a 5.15X P/E though, I believe there to be room for some multiple expansion. Looking at technicals, DEFT's price retraced 57% already which is in line and even at the higher ends of previous drawdowns. Now, DEFT trades around 25% below their 200-day moving average, just as they did at the interim bottom in April. The stock also closed red for its eighth week in a row, which calls for some mean reversion. Chart-wise, DEFT still remains in a longer term uptrend on the weekly view as price sits above April lows of $1.65. It is getting closer to that level, however, and if it closes below, the risk for further price drops increases. The RSI divergence is worrying too - RSI and its moving average continue to create lower highs and lower lows, which is often an indication of prices already having reached highs. Still, even if this means there won't be new ATH's, a relief rally is overdue and could produce serious gains even if RSI creates a new lower high. There's also a significant trendline starting from previous ATHs that acts as resistance. If price manages to close above it that would lay a much more healthy foundation for new gains. TradingView On the daily view, RSI is short of completing a bullish cross while the MACD has already done so. Both these could be indications of a bottom being formed at current prices. TradingView Risks This play is a very speculative one. It bears more significant risks than other, more established companies with stable earnings. On a macro view, a recession or a weak job market might cancel the crypto bull market as it can only flourish within a risk-on environment. It is safe to say that prices of DEFT would plummet if there was to be a crypto bear market. During the crypto winter in 2022, DEFT dropped 98%+, so a total loss of capital cannot be excluded. DeFi Alpha also carries a lot of execution risk, as investors do not get much insight about the trades that are being taken and have to fully trust the team to perform well, reducing predictability. Conclusion The core thesis remains. If we get strong crypto market performance into year-end, which current data suggests, DeFi should benefit greatly. Trading 37% lower than at the time of my last article, I believe the risk-reward ratio even slightly improved despite there being risks of the stock having topped out already. Into 2026, I would be very cautious holding this stock, as it seems uncertain whether a risk-on equity environment will be in play, which is needed for stocks like DeFi to perform well. Rating: Maintain Buy.
