Institutional investors appear to be switching to DeFi assets, with a flurry of institutional investment products offering exposure to the decentralized financial sector launched by leading asset managers this year.
Valor Inc., a Swiss company of exchange-traded products (ETPs) based on digital assets, became the latest asset manager to adopt DeFi on Oct. 26, when it launched the world’s first ETP tracking the symbol for governance of the main decentralized exchange Uniswap (UNI). The product is traded on the German stock exchange Börse Frankfurt Zertifikate.
Valorur CEO Diana Briggs said: “The future of financial services is being built on open and interoperable protocols.” She added that the company is working hard to bring additional digital asset ETPs to market and provide exposure to DeFi assets “through key investment channels”.
The product is physically backed, meaning that Valor buys and sells a corresponding value of UNI as ETP units are bought and sold on the exchange.
Institutional Resource of Valor
Valor was launched in 2018 and is quietly emerging as a significant player in the institutional cryptoproducts sector, having accumulated $290 million in assets under management.
It debuted with a Bitcoin ETP in December 2020 and launched its Ether ETP in April 2021, before continuing with tracking products Cardano and Polkadot in May and Solana in September.
Initially, its products were traded exclusively on the Nordic Growth Market. But in October, Valor’s ETPs were launched at the Börse Frankfurt Zertifikate, with Briggs commending German lawmakers for “providing a clear mandate for institutions to invest in cryptography” and maturing the digital asset sector for mass adoption.
Valorur’s parent company, DeFi Technologies, describes itself as “the only publicly traded company built to give investors direct exposure to the growing decentralized financial market.” Its venture fund offers exposure to eight major DeFi assets, including MKR, SNX, SUSHI, YFI, LUNA, LINK, UNI and AAVE.
it’s not the only way
However, Valor’s ETP is not the only way institutional investors gain exposure to UNI through a regulated product.
Grayscale launched its DeFi Fund in June with CoinDesk’s DeFi Index (DFX) of product tracking. Despite presenting itself as a brand that offers diverse exposure to a selection of leading DeFi protocols, the product has been criticized for tracking an index that is approximately 50% composed by UNI.
CRV is the second most dominant asset in the DFX index at 14.3%, followed by AAVE at 9.6%, COMP at 6.2% and SUSHI, MKR, SNX, YFI, UMA and BNT at around 2% a 5% each respectively. As of this writing, Grayscale’s DeFi fund has grown 43% since inception and represents an AUM of $13.3 million.
Grayscale also added UNI to its Digital Large Cap Fund in early October, with the token comprising the fund’s fifth largest.
More Asset Managers
Other institutional asset managers also stepped in to capitalize on DeFi’s meteoric rise.
In February, Bitwise Asset Management launched the world’s first DeFi index fund. While the fund has risen nearly 24% over the past three months, it has fallen 8.7% since inception.
Galaxy Digital collaborated with Bloomberg to launch a joint price index tracking decentralized financial assets, in addition to launching its DeFi Index Fund in August.
In late September, Amplify ETFs, the issuer of exchange-traded blockchain-focused $BLOK, filed a request with the SEC to launch the Amplify Decentralized Finance & Crypto Exposure ETF.
If approved, the fund will invest at least 40% of its net worth in shares issued by DeFi companies. This includes companies that earn at least 50% of their mining revenue and equity, provide DeFi services to traditional financial institutions, or develop and distribute DeFi applications and software services, as well as “decentralized pre-revenue finance companies”.
In early October, Australia’s Trovio Capital Management announced the creation of its Digital Asset Income Fund – an institutional product that offers earnings exposure to high-yield Stablecoin DeFi protocols. The fund will regularly rebalance its assets in an attempt to maintain 90% exposure to stablecoins, and anticipates annual returns between 15% and 20%.
Institutional DeFi Data
According to blockchain intelligence company Chainalysis, many institutional investors came to DeFi during the second quarter of this year.
The review estimates that transactions worth $10 million or more represented more than 60% of all transactions involving DeFi protocols during the second quarter.
In PricewaterhouseCoopers’ cryptographic hedge fund annual report, the company estimated that 31% of cryptographic hedge funds were using decentralized exchanges directly.
However, not everyone agrees that institutional investors are struggling to gain exposure to DeFi’s assets. Michael Moro of Genesis Trading told Business Insider recently that the prevalence of exploits and buggy code in the DeFi industry is scaring some big money managers.
“Errors and errors you’ve seen certainly leave [as instituições] shy of doing anything in size, on any specific platform,” said Moro.
While the recent US Securities and Exchange Commission (SEC) approval of the first exchange-traded US Bitcoin fund has been described as opening the door to new institutional capital for access to encryption, it appears that smart money is already there. keeping an eye on DeFi.
The demand is evidenced by the steady proliferation of DeFi-focused investment products this year, including ETPs, index funds and perhaps an ETF.
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Analyzing what exactly is the state of Uniswap’s investors
Uniswap [UNI], despite being a top-20 cryptocurrency, has been going on without an entire cohort of investors in its bag. However, even though investors managed to turn that around, the altcoin has been relentless and investors are losing patience due to UNI’s ongoing price action.
Uniswap going down?
Uniswap is one of the biggest DEXs on Ethereum and in the market. And yet, its performance week-on-week has made investors concerned about their investments.
While the month of October wasn’t as harmful thanks to its consolidation, all of that safety was stripped away after UNI finally fell through the $23-support level. At the time of writing, it was looking at the critical support of $18.9.
50% of Uniswap Liquidity Providers Are Losing Money Compared to HODLers: Survey
A new report on liquidity providers shows that half of the users providing liquidity on Uniswap V3 are losing money compared to HODLers.
The belief that all liquidity providers (LPs) make lucrative gains for depositing funds across various decentralized protocols like Uniswap and Compound, among others, has been refuted by a new study conducted by Topaze Blue and decentralized liquidity platform Bancor.
Liquidity Providers Make Losses
According to the survey shared with CryptoPotato, nearly half of the users providing liquidity on Uniswap V3 always end up losing money as against making gains from just holding the crypto assets.
This is as a result of the impermanent losses (IL) incurred on trading fees across various pools, the report added.
The study focused on activities on Uniswap V3, an Ethereum-based DeFi protocol, between May 5, 2021, and September 20, 2021.
During the study, over 17,000 wallets belonging to liquidity providers on the platform were analyzed. Furthermore, a total of 17 pools, including MATIC/ETH, COMP/ETH, and USDC/ETH, were also observed in the study.
Impermanent Losses Surpasses Trading Fees
Of the $108.5 billion trading volume recorded across these pools, trading fees accounted for $199 million. While this could have been major gains for LPs, impermanent losses wiped out fee income in more than 80% of the pools, with $260 million incurred in IL alone.
Based on this, users were left with a net loss of over $60 million, while 49.5% of liquidity providers had to settle for a loss.
The report noted that for every $100 worth of fees, users suffered an impermanent loss of $180, representing a net loss of $80.
Per the study, the pools that saw the major impermanent losses are MATIC/ETH (51%), COMP/ETH (59%), USDC/ETH (62%), COMP/ETH (59%), and MKR/ETH (74%).
“Our core finding is that overall, and for almost all analyzed pools, impermanent loss surpasses the fees earned during this period,” the report noted.
All Trading Styles Affected
The study also examined whether some LPs made more profit than others in terms of their trading style.
For this segment, the researchers made comparisons between active users, traders who adjust their positions more frequently, and passive users, and traders who prefer to hold their assets for a long term.
However, there was no statistical evidence that active traders made more gains than their passive counterparts, as IL surged more than the fees in all categories.
Interestingly, the only group of users who made more gains were just-in-time (JIT) traders, who benefitted from providing liquidity for a single block and quickly removing their deposits before impermanent losses set in.
Uniswap Price Analysis: UNI returns above $25, further recovery to follow?
- Uniswap price analysis is bullish today.
- UNI/USD set a higher low at $24.5 over the weekend.
- Uniswap currently tests the $26 mark.
Uniswap price analysis is bullish today as we saw a strong recovery after a spike lower to $24.5 over the weekend. Therefore, we expect UNI/USD to continue higher with the next major resistance at $27.5
The overall market traded with bullish momentum over the last 24 hours. Bitcoin gained 6.43 percent, while Ethereum 2.68 percent. Meanwhile, Avalanche (AVAX) is among the top performers from the major altcoins, with a gain of 9 percent.
Uniswap price movement in the last 24 hours: Uniswap returns above $25, prepares to move higher
UNI/USD traded in a range of $25.15 – $26.03, indicating mild volatility over the last 24 hours. Trading volume has increased by 29.48 percent and totals $237 million, while the total market cap trades around 16.24 billion, ranking the coin in 14th place overall.
UNI/USD 4-hour chart: UNI set to move higher?
On the 4-hour chart, we can see the Uniswap price action testing the $26 mark as bullish momentum has resumed today.
Uniswap price action saw bearish momentum return by the end of October. After several tests of the $27.5 mark during the second half of last month, a slightly higher high was set at $28.4 before a strong spike lower followed on the 27th of October.
Last week, UNI/USD started to recover, reaching the $27.5 mark again on the 4th of November. Another strong retracement followed over several days, leading UNI to spike to $24.5.
Uniswap started to recover over the weekend, returning above $25 previous support. Overnight, a slight upsurge took UNI/USD back below $26, with further upside likely to be seen over the next 24 hours after a brief pause.
Uniswap Price Analysis: Conclusion
Uniswap price analysis is bullish today as a higher low was set at $24.5 over the weekend, with further upside following over the last 24 hours. Therefore, we are bullish for UNI/USD as more eupside should follow later today.
While waiting for Uniswap to move further, read our guides on NFT tokens, Gemini Exchange Review, and Sunacrip.