If DeFi wants more institutional adoption in crypto, it needs to tap into fixed income markets first, says Infinity Exchange CEO Kevin Lepso.
The decentralized finance (DeFi) ecosystem scored another victory over traditional finance, often called TradFi, with the launch of the DeFi protocol by a former Morgan Stanley executive.
Morgan Stanley’s former head of structuring, Kevin Lepso, plans to offer an institutional fixed income plan that offers both fixed and floating rates with his new venture Infinity Exchange.
According to Lepso, his new project will allow DeFi traders to “implement arbitrage, pull liquidity from other protocols and hedge their risk positions based on futures rates.”
The DeFi market is known for volatility and therefore risk in digital asset transactions. Trading more options enables one to hedge risk and speculate along the entire length of the maturity curve. With more investable asset options available to trade along said curve, users can move more easily between risky and risk-free assets.
Lepso told Coin telegraph that the introduction of the crypto yield curve is important for the growth of DeFi transactions because it reduces volatility.
“If there was a crypto yield curve, a stronger set of products around stablecoins, and a way to equalize TradFi and DeFi rates, crypto volatility would be significantly less.”
This development lays the foundations for entrepreneurs and institutional investors to remain present in this space. Institutional interest remains high, according to a recent Bitstamp survey. 80 institutional investors surveyed believe that cryptocurrency will outperform traditional investment types in the next decade.
Lepso reiterated that if the space is to make more institutional investors feel safe in the market, using mechanics that already work in known markets is a place to start. “At TradFi, institutional investors are more active in fixed income markets than in equity markets,” Lepso said.
The CEO emphasized that if fixed income markets are the future of DeFi, institutional adoption will follow.