Why more institutional investors are joining DeFi

Decentralised finance (DeFi), an entire ecosystem built on blockchain technology and that doesn’t rely on a central authority, is booming. The total value locked – the overall value of assets deposited in DeFi transactions – grew from $601m at the beginning of 2020 to $239bn in 2022, according to blockchain data provider Amberdata. However, unlike what we have seen before, this rise hasn’t been driven mainly by professional and retail investors, but instead has been led by institutional investors who have either recently joined or are strengthening their presence in DeFi.

Indeed, according to blockchain data platform Chainanalysis, large institutional transactions – those above $10m – accounted for over 60 percent of all DeFi transactions in Q2 2021, up from around 10 percent in Q3 2020.

Additionally, a September 2021 survey, carried out by Nickel Digital Asset Management (Nickel), of institutional investors and wealth managers who don’t currently have exposure to cryptocurrencies and digital assets found that 62 percent expect to invest in these for the first time within the next year. The speed at which institutional investors have joined DeFi in the last year hasn’t gone unnoticed, so many people are wondering; what is driving this…