Cryptocurrency money manager Panxora is reportedly looking to raise up to $50 million for a new hedge fund to buy tokens associated with the decentralized finance (DeFi) space, at a time in which prices have been dropping.
The decentralized finance space has been growing exponentially so far this year, after DeFi lending protocol Compound started distributing its COMP governance token. A yield farming trend was started with the COMP token launch, with users lending and borrowing from protocols that issued their own governance tokens in a bid to maximize yields with the token rewards.
The trend saw other DeFi protocols launch their own governance tokens, which could be acquired by lending or borrowing assets on their platforms. Protocols like Yearn.Finance, which help users find the best yields in the space, were created soon after.
This saw the total value locked in the DeFi space surge from little over $500 million a year ago, to about $9.5 billion at press time, according to DeFiPulse. On these protocols users can, without having a bank account, lending their funds to earn interest, or take out loans collateralized with their cryptoassets, among other things.
CoinDesk quoted Gavin Smith, CEO of Panxora, as saying:
This has got the potential to really change the way finance is carried out
Thanks to yield farming, annualized percentage yields can often be of over 1,000%, although often these yields last for only a few days. Using stablecoins, users can get stable rates of at least 5% on various platforms, compared to 0.01% available at major banks.
Centralized cryptocurrency exchanges like Binance and OKEx have rushed to list various DeFi tokens as their popularity grew, and some have acknowledged that some market volumes may migrate to decentralized trading platforms like Uniswap.
This week, as the prices of major cryptocurrencies like bitcoin and ether dropped, so did those of native DeFi tokens like COMP, YFI, and UNI.
Featured image via Pixabay.