2017 and 2018 had ICOs, 2019 had IEOs, and 2020 has decentralized finance. DeFi, as this sector of the crypto market has been dubbed, has become one of the most talked-about subjects in recent months. Bloomberg released an entire guide on it, 4chan is absolutely obsessed about it, and even members of the secretive online investing group Value Investors Club have discussed it.
Some, though, are not diving headfirst into this segment of the market, despite the life-changing gains that some have claimed to have made.
Galaxy Digital, the crypto investment bank founded by Wall Street veteran Mike Novogratz, is one of these entities hesitant to dive into DeFi. Here’s why they’re keeping on… for now.
Galaxy Digital was asked about Ethereum DeFi in an earnings call
The gains that some have made through DeFi protocols and coins have been stellar, to say the least. Tokens pertaining to this space have literally surged 100,000 percent in the span of a week while certain protocols offer incentives that can generate hundreds of percent a year on the initial investment.
Some have cried that these trends are unsustainable. And while they might be, there remain many try to milk the DeFi cow for all its worth.
Galaxy Digital, though, is taking it slow.
The company held its Q2 2020 earnings call on Aug. 14, where executives like Mike Novogratz broke down the company’s performance and plans for the future. Near the end of the call, Galaxy opened the floor to analysts.
Mitch Steves of RBC Capital asked if the company intended on participating in “[yield] farming and decentralized finance” to “generate additional returns”:
“So as you guys know, there’s a very popular way of earning money in crypto, the crypto space — and both farming and decentralized finance, right. So if I think about where you are position now, is there any, I guess, any plans are you able to participate in that market to help generate additional returns?”
Here’s why they’re not entering DeFi just yet
Galaxy Digital, surprising some, said that it is not dabbling in DeFi at the moment.
After being handed the mic by Novogratz, company president Chris Ferraro said that the company has a team actively researching DeFi at the “protocol level,” weighing “all” protocols and coins by analyzing their regulatory compliance, competition, and more.
While the company is putting these resources to work in DeFi, Ferraro added that their involvement in the space in terms of investments is minimal.
“We’re making investments in technology around implementing into DeFi as opposed to necessarily interacting with the DeFi protocols ourselves. They’re still pretty small.”
On why Galaxy Digital is making infrastructure investments instead of attempting to “yield farm,” the executive explained that they need to wait on “how the regulatory framework evolves, how it scales and whether it makes sense to us to really be involved directly.”