Institutional Investments in DeFi: a change in tune

Bitcoin was created in 2009. It has been a wild ride, to say the least. I remember the days when Bitcoin was dubbed “magic internet money”. It was made out by some to be nothing more than an experiment that would surely collapse at any time. Yet, here we are, twelve years and $913 billion dollars later.

In 2010, the first Bitcoin transaction took place and that date is still celebrated as the Bitcoin Pizza date. Later, that year, the first exchange, Mt. Gox was launched and the rest is history. We now have all types of trading venues for cryptocurrency investing and trading, including Coinchange’s brokerage system and risk-adjusted yield farming product.

In the end of 2017, the Chicago Mercantile Exchange (CME) launched trading for Bitcoin futures to its customers and these products have seen massive adoption from institutional investors. While a U.S.-based Bitcoin ETF is still to be approved by the Securities and Exchange Commission (SEC), other countries have already taken the step to allow Bitcoin ETFs to be traded.?

Both Canadian and European markets, among others, have listed Bitcoin ETFs and have seen positive signs of adoption with two of the Canadian crypto ETFs surpassing $1 billion in volume.?

Throughout this progress, Bitcoin has been proclaimed dead countless times by experts of all sorts. Surely, wise men can’t be right about every single thing every single time. Often slandered as naysayers, cautious minds play their part as they should. Many of them have since turned around, including Don Tapscott.

It took some time for Bitcoin and cryptocurrencies, in general, to be taken seriously as a new asset class. Now, having crypto allocation in your investment portfolio is common. Looking back, it’s fascinating to see how quickly we adapt as a society. From Bizarre to trivial, Bitcoin has conquered its place in the world of finance.

DeFi is coming in fast!

It took some time for Bitcoin and cryptocurrencies to be accepted by traditional financial institutions and recognized by mainstream media. However, when it comes to the emergence of new blockchain-based sectors like Decentralized Finance (DeFi), it seems that the pace has changed.

While DeFi technically started in 2015 with the creation of the MakerDAO protocols, it took off at the start of 2020 and it has grown almost exponentially by all accounts. In the last year the total locked value (TVL) in DeFi grew by more than 1,000% from $7.30 billion to $82.09 billion USD.

When I see companies like MVIS, a subsidiary of the renowned VanEck creating Decentralized Finance index products in just one year since the trend began, it tells me that something quite bigger is in store for the sector, especially when you consider all the possibilities that the technology brings forth.

Adapt, Overcome, Survive

From what I can tell, there are two reasons for the fast-paced acceptance of institutions when it comes to DeFi. Of course, Bitcoin and the typical crypto have already paved the way for what’s to come. We’ve seen BTC turn pennies into millions and that may give institutional investors some confidence to step into the “murky” waters of DeFI.?

On the other hand, competition may be driving adoption, so to speak. I’ve watched kids on Reddit take down billion-dollar hedge funds, during the infamous GameSpot fiasco, providing some of the best fundamental analysis I’ve ever seen in the process. All of this is thanks to traditional online brokers that have democratized the access to financial products and allowed the retail market to join the game.

When it comes to DeFi, no one can turn the lights off, however, and while the massive APYs seen in some DeFi investment products are surely attractive, I believe institutions will choose to participate in the Decentralized Finance space because otherwise, they’ll be the odd men out,?

Moreover, DeFi is getting serious when it comes to offering complex financial products to its audiences that range from decentralized insurance, to synthetic derivative products. All of this is happening at an astonishing pace. With new ecosystems solving scalability issues, there’s no telling what will happen in a few years from now.

The bridge

DeFi is democratizing investment and may be the key to level the playing field for billions of people all across the world. However, while DeFi removes the middlemen and increases profits for the little guy, it is also a complicated realm.?

When you’re in DeFi, you’re on your own and that can be a good thing or a bad thing. That is why I believe that institutions will continue to invest in DeFi and that they will also adopt these products and adapt them for the convenience of their clients.?

Ultimately, I believe that the advent of Decentralized Finance will not lead to the end of traditional financial products but it will provide everyone with the option of choosing what type of product they prefer and it will certainly bring the bar up on what profitable investments should look like for the average citizen. That is exactly what we are trying to do with Coinchange.?