- Matt Hougan is the chief investment officer for $ 1.2 billion worth of crypto asset manager Bitwise.
- In a webinar on Thursday, he and analyst David Lawant shared their arguments for decentralized funding.
- They also broken down the top ten DeFi assets that have seen tremendous growth and innovation.
- You can find more articles on Insider’s business page.
When billionaire Mark Cuban talks about DeFi, reminding him of the beginnings of the internet, and Bank of America simultaneously publishes a report on DeFi’s radical challenge to modern finance, you know that a paradigm shift is likely on the horizon.
DeFi, or decentralized finance, generally refers to blockchain-based trading or credit platforms that are automated by software rather than being executed by human workers. DeFi applications are mainly based on the Ethereum network. (Ether, the digital token for the Ethereum network and the second largest cryptocurrency behind Bitcoin, shot over $ 2,000 for the first time on Friday.)
“Finance has been one of the sectors of our economy that has not been disrupted by software and automation. Almost every other sector of our economy has been significantly disrupted by software and automation,” said Matt Hougan, chief investment officer, Bitwise Asset Management. said in a webinar on Thursday with Fundstrat Global Advisors.
San Francisco-based Bitwise, whose net worth has grown from $ 120 million to $ 1.2 billion since its flagship Bitwise 10 Crypto Index Fund went over-the-counter last December, opened the world in February first DeFi index fund launched.
Hougan believes that while Amazon used technology to reshape the retail industry, financial activities such as banking, lending, and trading are still controlled by centenarian Wall Street institutions. However, more and more crypto investors are viewing it as the last piece of cake eaten by software.
“So much of the cost of traditional financial services today isn’t embedded in what they actually do,” he said. “It’s embedded in this high-priced suit and that trust that is conveyed through traditional human channels and traditional brands.”
DeFi applications, on the other hand, arose out of a desire to automate the middlemen on Wall Street through blockchain and software to automate the process. This idea can be applied to just about any financial industry, he added.
Breathtaking growth through permissionless innovation
As a sector, DeFi barely existed as of June last year, but it has since grown into a $ 42 billion market.
“DeFi would classify the 55th largest US bank with assets of $ 42 billion as a category. It happened in just a year and it’s pretty incredible, ”said David Grider, lead digital asset strategist at Fundstrat, in the same webinar.
Hougan, who finds such growth “breathtaking,” said a lot of it has to do with the kind of “permissionless innovation” that is taking place in the DeFi space.
“If you want to develop a new product in partnership with JPMorgan today, you have to embark on a multi-year business development process,” he said. “You’d need to have the right backers and the right venture capitalists to integrate with them and give them access to their clients, their client accounts, or their internal systems so that you can take advantage of who they are. do it. “
Most entrepreneurs would resist the tedious, multi-step process that would likely take years to complete. However, in DeFi, anyone can see what the biggest players are doing and then build their applications on it without getting involved in the business development process.
“So it unlocks these incredible entrepreneurial skills,” said Hougan. “There is more news in this area in a week than in a year in traditional finance. Part of that reason is just unlocking innovations without permission that really mean something here. “
Breakdown of the 10 Biggest DeFi Assets
Major DeFi assets are rapidly appreciating now, but the ecosystem has been quietly building its products in recent years.
One such example is Uniswap, the coinbase of the crypto market. The decentralized exchange began with a $ 100,000 grant from the Ethereum Foundation in 2017, but has generated over $ 100 million in fees in the past seven days, according to David Lawant, a research analyst at Bitwise.
The combination of DeFi’s tremendous growth and multi-year track record means that there is a pretty large investable universe in space, but the nascent corner of the crypto market is also exposed to high technological, regulatory and security risks.
To be risk-conscious about the growth of the sector, Bitwise’s
Tracks the top 10 largest DeFi assets weighted by market capitalization. As of April 1, these DeFi stocks are shown in the table below.
Uniswap, SushiSwap (a fork from Uniswap), 0x, and Loop ring are all decentralized exchanges or whatever Lawant “plays infrastructure” in the DeFi area.
Aave, Manufacturer, and connection are three of the biggest borrowing room focus protocols. Meanwhile, Synthetix and Uma are all about derivatives and the issuance of synthetic assets, according to Lawant.
Last but not least is nostalgiawho can be viewed as an aggregator or asset manager who “enables its users to get the best returns and opportunities,” he said.