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Tuesday, March 5, 2024

Market Report: DeFi May Become Trillion Industry

DeFi could become a billion-dollar industry, says Blockdata. For this, banks would only have to invest 1 percent of their AUM. At the moment there are still concerns.

Bitcoin treads on the spot. Compared to yesterday’s trading day, the digital store of value recorded a slight price loss of 0.87 percent. As of press time, the digital store of value is trading at $ 47,887. In the altcoin sector, too, hardly anything has changed significantly among the ten most valuable cryptocurrencies. The majority of the top 10 coins are listed in a slight minus range of around 2 percent. The biggest loser is Solana with a price decline of 6 percent. Only Polkadot and Dogecoin can report green numbers. Outside the ranking, Shiba Inu in particular benefited with an increase of 35.76 percent. The Dogecoin blend was previously listed on the US crypto exchange Coinbase .

Aside from this, a report by the crypto analysis company Blockdata is currently causing a stir in the DeFi space . In it, CEO Jonathan Knegtel predicts that around one trillion US dollars could flow into the decentralized financial market in the next five years. He writes:

If even 1 percent of the assets under management of the world’s 100 largest banks were invested in DeFi, even if only on a trial basis, we would be faced with a cash injection of nearly $ 1 trillion.

Jonathan Knegtel, Blockdata CEO

According to Blockdata , 55 of the 100 largest banks have already invested in cryptocurrencies and / or in blockchain-based companies. As a result, the leap from crypto to DeFi space would not be far. Thus, the entry of “one or two big banks” could be enough to trigger a chain reaction that would drive more financial institutions into the sector, says Knegtel.

Regulatory concerns are holding back DeFi investments

In general, the traditional financial sector is closely following the development of the rebellious DeFi space. The rapid growth of the industry since last year in particular has made some investors itchy fingers. But many seem not yet ready to open their wallets. The Blockdata CEO believes that the regulatory concerns are too great.

The industry has also recognized this and is now responding with a new wave of DeFi solutions. These are projects that want to create a kind of link between the DeFi space and the regulatory needs of institutional investors. For example, the US FinTech Circle is currently working on a platform that will enable companies to access the DeFi lending market via API.

Blockdata also welcomes recent regulatory efforts from SEC chief Gary Gensler. In an interview with Bloomberg in early August, the former MIT professor called for at least parts of the DeFi sector to be placed under the care of the US stock exchange regulator. One possibility is to treat lending platforms as investment funds. “If companies advertise a crypto asset with a certain interest rate, that could be enough to put the loan under SEC supervision,” Gensler said at the time. 

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